The present climate for banking is filled to the brim with disruption. New technology is constantly emerging to provide the best experience for the customers. Accelerating digital transformation is has taken hold of banking and isn’t letting go. As such, the growth of the FinTech sector has accelerated to a great degree. Banking applications, mobile payment, challenger banks, and trading platforms are only some parts of the industry that have been affected by the pandemic-fueled surge.
What is FinTech about?
FinTech’s aim is to bring satisfaction and convenience to its users by facilitating online transactions and providing instant access to their funds. It has a lot of uses, from business and insurance, through personal finance, to trading applications. FinTech can tackle issues like poverty and access to financial services for people in third-world and developing countries by providing a cost-effective, globally available solution.
Since it’s a sector that has a direct effect on our lives, the industry has grown considerably. According to CBInsights, “There are 41 VC-backed fintech unicorns worth a combined $154.1B.”
This number is astounding. And that was in 2019. The pandemic has only sped this growth up. While the exact figures are not yet known, we can expect a 9.2% CAGR by the year 2023.
COVID-19’s impact on FinTech
FinTech is one of the industries that remained resilient in the new reality. In fact, due to lockdowns and the rise of eCommerce, it has achieved immense growth. The pandemic had accelerated the evolution of banking and forced providers to rethink their strategy and services.
Seeing that there were many businesses in need of a solution that could improve their processes, FinTech had lent a helping hand. Small businesses and startups had to do their best to stay afloat. Cutting costs is necessary nowadays, and so, the FinTech industry’s goal is to provide an inexpensive, reliable service to suit their needs.
According to this report, two-thirds of FinTech suppliers had to reimagine their business model to fit the current climate. Downtime, impaired employee and client onboarding increase in failed transactions and access requests were only some of the roadblocks that the companies had to overcome. Due to the incredible surge in transaction activity, FinTech businesses had to scale up extremely quickly.
Traditional financial institutions were left behind. As the customer expectations keep on expanding, they grow more and more used to the technology. As such, traditional banking has to embrace the new reality and focus on CX.
Taking advantage of cloud technology
Going with the times, the FinTech sector has based its operations on cloud technology. Instead of using legacy software and on-premises hardware, which is tough to scale, they resort to the cloud, achieving the tremendous potential for growth.
While there’s still uncertainty shrouding the industry, cloud migration has become one of the major elements of digitisation and digitalisation. As such, the increasing customer demands had forced FinTech to leave the doubts about the cloud behind and embrace the technology. The abundance of data and the immense processing power provided by the cloud has enabled the FinTech sector to make use of that information. Utilising Big Data helps with facilitating the transactions and personalising the experience for each customer.
Innovation is the main focus of FinTech companies, and, as such, they put a lot of effort into their Research & Development departments. Corporate culture is another field of interest. Since resources and technology are more or less available to the same extent for everybody, company culture is often the true driving force behind progress.
With the accelerated pace of FinTech growth, there have appeared some trends that gain in momentum as well.
A huge portion of the population still doesn’t have or have limited access to basic banking services. On top of that, small businesses and regular employees all over the world have suffered due to the pandemic, which impacted not only their health but also their financial stability.
FinTech is trying to find its way to countries with emerging markets, wherein lies a goldmine of new opportunities. It’s a perfect environment to disrupt the market and introduce a new level of convenience to everyday lives, especially since 1.7 billion people remain unbanked. Transactions with the use of cash are far more prone to fraudulence and stealing. FinTech can provide a far better level of security and comfort, just as it does in developed countries.
Payroll FinTech growth
FinTech enables employees to withdraw their earnings at any time of the month. Instead of relying on high-rated payday loans, workers can reliably use payroll FinTech without excessive costs. The salary advance sector lets workers get their salary one month prior. There’s also the cryptocurrency payroll which enables employees to use all of the benefits of blockchain technology without much hassle.
Blockchain has many advantages compared to traditional currency. For one, there’s speed. Settlements, instead of taking a few days, now can be completed within seconds or minutes. Secondly, there’s the notion of security. Since all of the data associated with the transactions is permanently stored on the virtual ledger and it’s public, you can access it at any time and prove that, in fact, a transaction occurred. Cryptocurrencies make the payment process seamless, stripping you of the obligation to go through tedious authorisation procedures. Instead, you’ve got your private P2P key, and that’s your only verification.
The rise of Banking-as-a-Service
The immense growth of cloud computing gave birth to another sector called BaaS. In essence, BaaS is the result of banking companies integrating their services with non-bank applications. This facilitates transactions and embeds the procedures into the users’ lives. Instead of utilising separate apps, the user can now do everything in one place. This, in turn, improves Customer Experience tremendously, setting a new standard for financial institutions.
Emphasis on Customer Experience
Artificial Intelligence is pushing the world forward. FinTech is no different. To maximise Customer Experience efforts, providers utilise Big Data and sophisticated AI algorithms to ensure personalisation features. The needs of the customer are now a top priority. Additional features like risk management suggestions, chatbots, and fraud detection are only some of the ways FinTech professionals go about improving CX.