How Does Fintech Disrupt Banking?

It is said that “entrepreneurship is creating something out of nothing.” Technology and entrepreneurship have created a new phenomenon of creating value out of zero. Fintech disrupting banking is bringing more creativity to the platform that people are already aware of. If we can make it easier to access and navigate, more people can go beyond just using it as an ATM. 

According to stats, it is anticipated that by 2022, the global financial sector is going to be worth US$26.5 trillion with a CAGR of 6%.  

Considering the potential and limitless opportunities fintech offers, one can’t help but wonder “What’s the fintech impact on banks?” Surely, this technology has had some effect on the banking sector in one way or another.

While the blockchain promises to revolutionize the payments industry, robo-advisory and other artificial intelligence-driven solutions are reshaping the future of finance. Here are some interesting statistics that fully support the amazing concept of Fintech.

Today, we will be discussing how fintech is changing the future of banking and accounting. Read down below to find out more about the effects and impact of fintech on the banking sector.

What is Fintech Disruption?

It's the buzzword of the decade. Fintech disruption refers to how Fintech companies are changing the way we do business.

Fintech companies are using technology like blockchain and AI to streamline processes, increase efficiency, and improve security. They're doing this by making it easier for people to access credit, transfer money, invest their money, and secure loans.

This has been happening for a while, but only recently have Fintech startups emerged as popular and successful.

Fintech Disruption in the banking sector is the use of new technologies to disrupt the banking industry. It is caused by the emergence of new alternative financial services (AFS) providers. 

These providers offer technology services that allow consumers to manage their finances online or via mobile apps. Some AFS providers also offer peer-to-peer lending services and crowdfunding platforms for businesses, which are cheaper than traditional banks.

As a result of this disruption, traditional banks have seen a decrease in profits, as well as an increase in competition from AFS providers.

How Fintech is Disrupting Traditional Banking?

Fintech can be regarded as the biggest challenge that banks have had to face to date. However, this does not mean that the future of traditional banking is bleak.

Digital Disruption in the Banking Industry

Digital disruption in banking can allow traditional banks to cope with the rising competition, or better yet; partner with fintech to disrupt the whole banking industry. 

In 2019, nearly 70.8% of senior banking executives expressed that it’s a good opportunity for banks to collaborate with FinTech and Big Techs to create new services. 

According to Citibank, due to the rise in fintech, we can expect a 30% decrease in the banking sector job market. Fintech software development services are helping businesses, companies, and individuals to modernize their operations.

To keep up with the growing competition, a lot of banking systems have also started adopting newer technologies. These include blockchain, artificial intelligence, quantum computing, and more. 

Moreover, banks are also gradually getting comfortable with the idea of investing in and collaborating with fintech companies. 

For now, it wouldn’t be correct to assume that fintech will completely replace banks in the future. However, there’s no denying the fact that the effects of fintech on the banking industry have been huge. 

How Does Fintech Impact On Banks?

Will Fintech replace banks? It is unlikely that fintech will completely do it. Banks still offer a range of services that fintech companies have not yet begun to offer.

Banks have a strong reputation for providing financial services to customers, and they are heavily regulated to ensure the safety and security of customers' funds. They also have a well-established infrastructure, including physical branches and ATMs, which cannot be easily replicated by fintech companies.

While many customers prefer to use digital banking services, most still rely on traditional banking products, such as checking and savings accounts, loans, and investment advice.

It's more accurate to say that fintech and banks will continue to coexist and complement one another by offering different types of financial services. In the future, banks may adopt and integrate some of the technologies developed by fintech companies to stay competitive.

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The Fintech Revolution

Financial technology has allowed people to do much more than just make transactions and check bank balances. The speed at which the fintech industry is evolving suggests that we are in the midst of what most financial experts would consider a ‘paradigm shift.’

1. Ease of conducting digital transactions

Fintech is changing the whole landscape of the finance industry rapidly. As people increasingly manage their finances digitally, banking will become more streamlined and open.

Though fintech solutions offer a lot of benefits, one of the biggest advantages is that it allows people to make transactions from almost anywhere.

This has eliminated the need for people to visit banks frequently since it’s possible to send and receive money only with a few clicks on the phone. Also, people no longer need to carry cash, debit, and credit cards with them at all times.

2. Mobile apps for handling finances

Fintech has also started making use of mobile apps to make the transaction process easier and accessible through apps such as Besure. Consumer Affairs revealed that eight out of ten Americans are more likely to make digital transactions rather than go to a bank for it. 

3. Reduced paperwork

Fintech disruption has greatly reduced the need for paperwork when it comes to applying for insurance and loan applications. Remittance services have also been revolutionized by this technology, making it faster, cheaper, and more convenient.

4. E-wallets for quick, easy, and safe payments

E-wallets such as PayPal, Apple Pay, and Airtel money are becoming increasingly popular among people. These fintech products allow users to store their passwords and payment information for numerous websites and payment methods. 

You might also be interested in reading: AI Myths You Need to Stop Believing in

The Future of Fintech and Banking

Undoubtedly, the year 2020 was not the best for many industries due to the Coronavirus outbreak. However, the fintech market reported rapid growth during this period.

Thanks to fintech solutions, businesses, companies, and consumers were able to manage their financial operations without the need for physical contact.

As blockchain technology matures, it will become an integral part of the financial industry, reducing the time needed for transactions and improving cash flow.

Fintech has the potential to enhance the experience, speed, and efficiency of many aspects of daily life. Adoption of fintech software development and technology is the next big thing that is going to boost the cycle of productivity and growth in nations. 

Investors are pouring investments of hundreds and millions of dollars into fintech startups. According to Statista, as of May 2023, the total number of fintech startups in America alone was 11,651. 

Fintech and Banking Industry

Though the advancements in financial technologies are happening at a very fast pace, we have only begun to scratch the surface of what is possible and how fintech is going to be changing the nature of banking in the future. 

The impact of Fintech disrupting banking is huge. The technology behind fintech is allowing small businesses to thrive by providing them with access to financing, and it's also helping individuals save money on their loans.

The biggest impact fintech has had on banks is that it has made them much more accessible for everyone. This means banks can save on costs, which makes it easier for them to pass savings along to customers in the form of lower fees, and better rates on loans or credit cards.

How Fintech Will Help Secure Your Businesses In The Future?

Fintech has been a game changer in making things more convenient for traders and businesses trying to grow outward. The number of fintech software development companies keeps growing, increasing their business in our highly modernizing world.

Here are 3 ways fintech will help secure your businesses in the future:

1. Providing better security: Fintech can help secure your business by providing you with better security tools. With more secure technologies, you can protect yourself from hackers, data breaches, and other threats.
2. Improving customer experience: Fintech will also help improve customer experience by automating processes such as payments or invoicing. This means that customers will be able to get their orders faster than ever before!
3. Saving money on expenses: Finally, fintech can help businesses save money by providing cheaper solutions than traditional methods like paper checks or credit cards (that charge a fee).

However, for fintech to truly take over the market, some challenges in the financial sector need to be overcome first. Especially in the data protection and regulatory space. 

As many technologies such as AI, blockchain, and big data come into use, leaders of businesses must adopt fintech applications in their business models.

Looking for a reliable fintech software development company that can answer all of your fintech-related questions? 

Get in touch with InvoZone today to build innovative, invincible, and enhanced financial solutions.

Frequently Asked Questions

1. How is technology impacting the banking sector?

Technology is changing the banking sector in many ways.

For one thing, it's making it easier for customers to access their accounts. With apps like Venmo, you can access your money from anywhere with an internet connection. 

This is convenient, but it also means that you are less likely to keep enough cash on hand to avoid fees at the ATM. And that's why some businesses are starting to offer "cashless" services—so you don't have to carry around cash and deal with the hassle of carrying bills around with you.

2. What are the biggest risks fintech poses to banks?

The biggest risks fintech poses to banks are:

• The possibility of bankruptcy.
• The loss of customers.
• The inability to compete with new services and products offered by tech companies.

3. How are Fintechs impacting the banking industry?

The biggest impact of FinTech is that it allows people to make transactions seamlessly through their phones or computers without having to go into a brick-and-mortar location to do so. This means that you can get cash from an ATM without having to drive across town just to do it, or pay bills online without having to wait in line at the bank branch when you want their services.