Effects of Fintech on Financial Industry
Technology is not new to the financial sector – be it the introduction of credit cards or the launch of ATMs –the financial industry has always been driven by technology.
But none of the technology has ever been as gutsy as ‘fintech’ – a portmanteau of “financial technology.” From utilizing machine learning algorithms to using blockchain technology, fintech has made inroads with dozens of applications designed to navigate the complex, compliance-regulated financial world. It has very easily and very quickly changed the way consumers access their finances.
The fintech phenomenon is not new, but it has evolved so quickly that it has successfully caused disruption in the traditional financial industry. In this article, we’ll walk you through some of the technological advances fintech has brought about in the financial world.
1. Chatbots for Customer Service
Chatbots are gaining popularity in the financial sector for making successful customer-facing interactions. These chatbots use natural language processing and machine learning to learn from human interactions continuously. They work at a phenomenal speed; a task which typically takes around 45 mins, chatbots can do it in 2 mins. So, chatbots not only saves time and improves customer experience, but they also free up your customer service agents to focus more on value addition.
2. Omni-Channel Banking for Convenience
Banking is no longer a branch-specific activity. It encompasses all the digital channels (social, mobile, and online), reducing the need to have several brick-and-mortar bank branches.
Fintech has brought about a rise in neobanks. Neobanks are banks without any physical location but provide customers with savings, checking, payment services, and loans on a completely mobile and digital platform.
3. Personal Loan Apps for Easy Lending
Fintech has also overhauled credit by speeding up the approval processes, streamlining risk assessment, and giving easier access to finance. People around the world can now apply for a loan on their mobile devices, and with new data points and better risk modeling, fintech has managed to expand credit to underserved populations.
Fintech has also managed to keep it simple for small and medium-sized businesses to get quick loans through personal loan apps. Some of the fintech companies offer a line of credit to business owners which they can use whenever they want without going through a long exhaustive application process and endless paperwork.
4. Blockchain for Digital Transactions
Moving money around is something fintech is very good at. Cryptocurrencies are providing users with cheaper and faster ways to transact. The distributed ledger system of blockchain exercises stringent controls enabling smart contracts and auditable data. According to NASDAQ, blockchain’s most notable application will be its ability to transform payments for both banks and customers, by reducing cost and time taken for the transfer.
5. Biometrics for Stronger Security
Biometrics promotes quick authentication, avoiding the frustration of remembering multiple passwords. Biometrics are used in various ways, such as thumbprints, vocal patterns, facial recognition, iris scans, etc. Biometrics-based authentication solutions are extensively used in banks to strengthen security.
Shiv Nanda is a financial analyst who currently lives in Bangalore (refusing to acknowledge the name change) and works with MoneyTap, India’s first app-based credit-line. Shiv is a true finance geek, and his friends love that. They always rely on him for advice on their investment choices, budgeting skills, personal financial matters, and when they want to get a loan. He has made it his life’s mission to help and educate people on various financial topics.