Now that FinTech-Bank partnerships are becoming a common phenomenon in the financial sector, it’s high time to learn all about FinTechs and how they can impact the banking industry. FinTech companies are startups that develop customer-centric digital financial solutions that can be used to boost the digital revolution in the banking industry. With the help of FinTech solutions, customer onboarding, customer due diligence, and customer monitoring can be made easier. Common technologies include:
- Online document verification software
- Online proof of address verification
- Online bank account verification
- Open Banking APIs
- Online KYC verification solution
All There to Know About FinTech & Banking
Before the concept of FinTech, financial institutions have been offering traditional banking services such as bank accounts, loans, or credit cards. Over time, customers became familiar with technologies and expected banks to provide better services including payment options, fraud management, or even personal financial guidance and digital assistants.
While banks seek to have a single platform for their customers to use a series of services, FinTech companies started developing financial services designed to meet specific pain points of customers. With a single Google search about FinTechs, you’ll find endless companies and the products that they offer.
Thanks to Open Banking APIs, banks can now work alongside FinTechs to build state-of-the-art banking solutions that make the digital banking experience for customers seamless for customers. FinTech firms are providing customers complete control over their finances, and banks are happy to partner with FinTechs so that they can share the services with more customers.
Difference Between FinTech and Banks?
Banks are financial institutions that offer customers financial products and services to complete financial activities. FinTechs on the other hand develop financial technologies that can help in improving the customer banking experience with digital solutions.
How Is FinTechs Disrupting the Banking Industry?
So how are FinTechs affecting banks? Initially, banks are being pushed to adopt a more customer-focused banking strategy and also improve how they’re offering their services.
Digital financial technologies offered by FinTech firms should exceed customer needs better than traditional banks, or high-risk customers looking elsewhere for their services. This has also increased healthy competition throughout the financial sector for a better customer experience. Thanks to FinTech developing better technologies, it’s better for customers to utilize and banks to implement such technologies into their service offerings. This has caused the financial services industry to enhance its game in driving innovation within the industry itself.
Every part of the financial sector has something to benefit from FinTech technologies. Banks can use the latest technologies to drive innovation and grow their market share. FinTech gets access to banks’ financial data on a secure open banking network which can be used to refine the technologies. Importantly, customers receive a seamless digital banking experience without having to worry about data security and the flexibility to bank digitally instead of visiting brick and mortar branch locations.
There are tons of ways how FinTechs are fundamentally changing the financial landscape:
1. Smart CHIP Technology
Smart CHIP ATM cards have improved the risks associated with card transactions. It comes with EMV technology that’s embedded in the chip. The technology relies on one-time passwords for every transaction.
Bank officials generally advise the customers to memorize their pins to avoid problems and hassle. Compared to smart chips, magnetic stripe technology relies on the same pin for all transactions, making it more susceptible to fraud.
2. Biometric Sensors
The FinTech industry has given birth to many innovative solutions, and biometric sensors are one of them. Biometric sensors with iris scanners are two of the most technological advances in recent times. By combining both these technologies, banks can remotely onboard, and verify customers from all over the world.
3. Online Transactions
For decades, the Automatic Clearing House has been handling the money transfer needs of millions of Americans. With the rise of technologies and FinTech businesses, online money transfers have become famous.
According to the Federal Reserve Report for the year 2016, the number of online transactions processed in 2016 was more than 3362 million. With online payment services like Apple Pay, Google Pay, PayPal, and more becoming more famous, the number of transactions has continued to grow.
4. Omni-Channel and Branchless Banking
FinTech financial services have transformed the banking landscape from branch-specific processes to various digital channels. Also, customers don’t have to rely on brick-and-mortar branches to perform basic banking services. As a result, we’ve seen many banks reduce their number of branches by relying on omnichannel banking. In the European Union, over 9100 bank branches were shut down by the end of 2016.
5. Online Customer Verification
FinTech companies have helped in reducing the challenges that happen during the customer onboarding process. Technologies like online document verification, online bank account verification, utility bills verification, and more can reduce the risk of fraudulent onboarding.