How Fintech is Disrupting and Innovating The Financial Services We Use.
How Fintech is Disrupting and Innovating The Financial Services We Use.
Fintech is changing the way that the we bank, making it easier and faster than traditional storefronts. I sense a disturbance in the Force...
Join the DZone community and get the full member experience.Join For Free
Innovations in the IT industry have been the driving force behind business growth. Technology has helped enterprises to stay competitive in the market rather than becoming obsolete in the rapidly changing world. Fintech players have grown in massive numbers attracting considerable entrants to their market every day. Today Fintech offers simplified services that give access to a variety of value-added services and quicker solutions.
The wait for the transaction to complete is not valid anymore. Fintech has transformed banking sector. The new incumbents pose challenging tasks to the bankers who still prefer the traditional model of banking. The bricks-and-mortar banks have their work cut out to overcome the emerging threats. The extension of their services to the customers by embedding the new technology in their traditional banking is seen as a step towards a positive change that may help to retain the customers.
Customers like to experiment with the new services offered by the Fintech players, especially when it eases their banking needs. They would like to spend smart, track their expenses consciously and use easy applications that fulfil all their requirements in a flash. Tedious steps involving registration, approval for simple transfer annoy them, and a visit to the bank just for the signature will add to the frustrations.
Traditional Banking and Fintech Startups
Certainly, banks are facing the heat to overcome the disruption caused by new Fintech counterparts and how to synchronize and adapt to the new changes that facilitate customer’s satisfaction is apparently the new challenge. Despite these obstacles, the four major banks continued to remain top of the table data released by the Federal Reserve.
The Federal Reserve released statistical data pertaining to large commercial banks that have consolidated assets of $300 million or more. JPMorgan Chase (JPC) topped the rank with $2,138,002 worth of consolidated assets followed by Wells Fargo with $1,749,176, Bank of America with $1,707,215, and Citibank with $1,369,153.
The Federal Reserve Bank of San Francisco statistical data of the first half ending June 2017 showed a marginal rise in the profits compared to the last year. The data released showed that profit from interest income of large commercial banks across the district stood at 4.03% compared to the last year of 3.98%. The report also read that district’s return on average assets ratio (ROAA) surpassed the national average in 2016. This half-yearly rise in these commercial banks shows that their earnings have strengthened despite the disruption caused by fintech startups.
Commercial banks have managed to compete with the Fintech startups by embedding the latest trends in banking technology in their existing infrastructure. Accessing their financial services at the simplest and convenient way possible is the best thing to do to maintain the reputation among their privileged customers. Smartphone’s are becoming the tool to manage the finances and banks offer their services on API platform. These applications are easy to use, and there is a constant improvement to make the technology user-friendly with safety and security.
In various surveys conducted by the Federal Reserve show that eighty percent of the people own mobile phones and have access to the internet at home and away. The Brick and Mortar banking are offering various services 24×7 through mobile banking app and internet banking. Mobile banking is more convenient and smart way to manage your finances. The BANKERS are coming with an innovative feature to sign-in such as fingerprint sensor to avoid remembering the complex passwords that require necessary change frequently.
Future Hold for Those Who Thrive With Digital Transformations
Innovations are driving banking sector like ever before. Bank of America tops the table for best innovations in digital capabilities with respect to functionality, ease of use, privacy, security, quality, and availability.
To boost up the business Bank of America, Wells Fargo, JP Morgan Chase, Ally Bank and other banks offer banking chatbots in their app to give the customer a pleasant experience in managing their financial data. It is a virtual assistant that advises you on all financial dealings and helps save you lot of money. Here is an example, the virtual assistant may calculate reward points based on your credit card payments and asks you to push the notification to evaluate the exact amount you might be saving. Generally, we manually calculate the reward points and more often than not we allow it to expire due to our hectic schedule. These chatbots help us precisely and fill the gap where we lack and offer significant benefits.
With all the disruption talk on banking sectors, Lael Brainard, member of the board of governors of the Federal Reserve had a different opinion about fintech apps during her speech in April, 2017. Brainard indicated that all fintech developers need banks somewhere in their businesses. Access to payment systems, complete automation in banking activities, legal framework, and access to accounting data is some of the essential aspects that fintech startups look upon to banking. She pointed out those digital wallets draw funds from bank accounts or payment cards and loans for such startups originate from banking partners. She emphasized that almost all Fintech apps depend on the bank at some point.
Fintech Players and How They Are Beneficial
Enter the new era of Fintech, the convenience and trust they bring in their apps are amazing. Be it shopping or saving, transfer or receive funds, everything happens in real time. Below we will discuss how traditional banking and the Fintech players operate in the technology-driven world.
Undoubtedly, Fintech companies and other non-banking financial institutions have changed the functioning of traditional banking. These new startups have the advantage to tear down and rebuild. Often with the fast-changing technology, the startups outstrip the law and regulations. They need to adapt to the legal and regulatory framework at the beginning of the new venture. This is the key to challenge the existing models.
There are many players in the market that provide various financial services from loans, setting up the online business to accept and make payments. The talent is the most prominent investments for all fintech startups. You do not need any more physical retail showrooms to sell. You just need to sign up for the apps and start selling your products.
There are lots of Personal Finance apps that make life a lot easier, and it comparatively gives better results than the traditional complications that are involved in the banking parameters. When it comes to availing loans, there are an increasing number of online lenders available in the market which offers better interest rates that challenge the loan options offered by brick-and-mortar banks. There are a number of apps that help find the credit score. Even for those who have bad credit, lenders are willing to offer loans tailored made to fit their repaying capacity.
Below we have discussed some leading financial apps in the market that help to manage our finances, and where brick-and-mortar lacks, these come in handy to fill the gap and make things a lot easier.
SoFi is one of the best known for student loan refinancing in the market. The student can apply for unemployment protection if they lose a job with no fault of their own. But the interest will continue to accrue and will be added to the principal amount. SoFi also offers job placement assistance during the forbearance period.
Mint is one of the best known for managing finances with ease. It even lets you check your credit score for applying for loans. It tracks your bills, payments, creates budgets and also offers suggestions based on your spending. The data exchanged with Mint is encrypted with 128-bit SSL which offers high-level protection to your information.
Wally is most similar to Mint when it comes to managing your money. It gives you the full picture of the income and expenditure and helps you understand your finances better. Earlier it was available only for Apple users. But now with their recent innovations, it is now available on Android platforms too. Users can download and experience the application that is available for free on the market.
Pocketguard specializes in connecting all your financial accounts in one place and gives you a clear picture of your financial health. This application is downloadable for free, and when it comes to remembering and logging into each bank application, these apps come handy to see all our bank accounts in a single platform. It also suggests the ways to save money and alerts you when you need to slow your spending. Pocketguard is available only in US and Canada and as for other users visit their website for updates.
Bricks-and-mortar banks have clear tasks ahead on how to develop a system that is more convenient for its customers compared to those financial applications that offer hefty benefits available for free. Most importantly these apps are tailor-made for people, and it surpasses all the complications of procedures and gives the users a satisfying experience which in turn serves as a referral for others to download the app. Bankers may connect with their existing infrastructure with the latest technologies and compete with these entrants in satisfying the customers.
In conclusion, Fintech can be disruptive if the innovations in banking sectors take the backseat. Bankers must continuously look out for the additional benefits and improvements they can provide to satisfy the customers. Opportunities for fintech is wide open and how well the startups rise to the customers’ expectations will be a challenge.
However, there are positives for both sides, and as incumbents have a strong reputation and an established leader in the financial framework, they have the added advantage to watch the fintech players operate and later step-in as and when required.
Published at DZone with permission of Mitul Makadia . See the original article here.
Opinions expressed by DZone contributors are their own.