How FinTech Companies Are Challenging the Biggest Banks
The global financial crisis in 2008, which led to a full-blown international banking crisis, was considered the most serious crisis since the Great Depression. And while it was a downfall for traditional banking systems, it paved the way to the emergence and rapid success of FinTech companies.
Financial technology, also known as FinTech, is an innovative approach to traditional financial methods used by brick-and-mortar banks and financial institutions. FinTech has given rise to a range of new business models, applications, and processes.
Modern financing companies heavily rely on technology. They use it for various processes, such as processing application, screening candidates, collecting repayments, and even offering financial advice. All FinTech banks follow the same business model and that is the integration of technology-enabled innovation.
Innovation is central to FinTech companies. As the demand for financing solutions increase, so as the demand for efficient, high-quality services. People have gone tired over traditional banks’ approach in meeting their financing needs. They have gone sick and tired of the long queues, complex loan applications, strict guidelines, stiff requirements, and many other limitations. Banks were unable to meet the ever-changing needs of modern consumers.
FinTech companies, on the other hand, apparently has the solution to all these problems. The integration of technological innovation enables these companies to adapt to current market conditions.
As consumers become so much busy with their everyday life and work, FinTech companies enabled them to apply for loans without leaving home. People can consider online small financial support. All they need to do is fill out online forms from their mobile devices.
When sending and receiving payments abroad became too much of a hassle, FinTech enabled international money transfers at very minimal rates.
When borrowers don’t qualify for a bank loan, there are so many FinTech companies that can entertain their loan applications, without too much fuss. The high fees, inflexible timings, and narrow range of financial products and services are all too much to bear for modern consumers. Thanks to FinTech, they can get the financing help they need whenever they need.
Furthermore, AI-focused FinTech start-ups have revolutionized the way financing services are provided through tools and platforms like virtual financial assistance, such as Chatbot. Now, consumers have access to personal finance apps that allow them to track and manage their expenses, save money, and plan for their future.
Fintech has undoubted benefits and advantages over traditional banks. However, they aren’t fool-proof from challenges. One of which is that FinTech has the tendency to be decentralized which hinders regulatory efforts.
Another challenge is how FinTech companies can monetize services for low-income consumers, which is currently their target market. These are people who usually have poor credit ratings, unsettled loans with their banks, and sometimes are even faced with legal liabilities. Offering lower pricing without the necessary capabilities can result in significant financial losses.
Furthermore, FinTech companies need to continuously make efforts to promote user experience. With online threats that undermine the security of personal information, many consumers are still deterrent to avail of FinTech services. Start-ups should focus on communicating the tangible benefits of their services to consumers.
Lastly, the use of FinTech tools like cloud computing and AI, while seemingly limitless, is potentially risky. Despite the fact that technology can make financing services more manageable, start-ups still need to ensure that these technologies are run and supervised by humans.
FinTech companies are changing the game, since the major financial breakdown of traditional banks, consumers have found solace from innovative FinTech start-ups. They have no doubt revolutionized the financial industry, providing products and services that meet the ever-changing needs of modern consumers.
Nonetheless, there are still some challenges that FinTech companies have to face in order to maintain their current success.