- April 15, 2021
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FinTech, or Financial Technology is the broader term used to describe computer programs and other technology used to support or enable banking and financial services. For example, the application or tool a customer uses to check their balance or make payments online, falls under the category of FinTech.
Now, how has FinTech impacted traditional banking?
The FinTech sector is rapidly evolving as technology constantly changes and expands. It uses technology so as to achieve more efficient financial services. That concludes in the disruption of the traditional banking system by modifying the payments mechanisms. Through technology, it offers opportunities in terms of enhancing the current financial services and widening the consumers’ choices.
FinTech companies such as eCREDO, deliver financial services, at an affordable cost, to the vast sections of population groups. Notwithstanding the widespread expansion of the digital banking system, FinTech startups offer low cost transactions internationally and with the ability to connect multiple accounts from different financial institutions. If you were stuck in the traditional banking model, then this would have been impossible to do because traditional banks want to have ownership of their customers. Another innovation that moves us away from traditional banking is open banking.
Open banking is a banking practice that allows anyone, personal or corporate customer, to merge all the accounts they have in any bank that abides in open banking in one application and control their banking through a web or mobile portal. This gives the customer better control of their finances and aggregated control in one app and not many, at any time. A good example of open banking is the Curve app (https://www.curve.com) which utilizes open banking to aggregate one’s compatible banking under one app.
Traditional banking has to become cheaper. By using modern banking methods it is unnecessary for one to go to the bank. As a result, banks need fewer employees hence they have less expenses. This is one of the major reasons why traditional banks are now mimicking the FinTech model – as they come to understand the latter is more efficient, thus working – by creating mobile apps or online portals and urging their customers to use these methods by offering reduced fees when using their online services. On a different note, FinTech achieved to bring transparency forward. There are no hidden fees and the customer is more educated on the banking sector in order to now know and understand how the banking system and the services they use work. Traditional banking’s model is beginning to be considered obsolete, as traditional banks want their customers to come to their branches. Online procedures are faster and therefore more up-to-date as they use modern technology.