Financial technology (fintech) often refers to contemporary developments in a modern movement to agitate the banking sector. The reality of the fintech industry is that technical assistance has long been a part of the method that firms use to encourage more customer interactions, multiply profits, and generate personalized approaches.
The fintech industry is responsible for the inception of credit cards in the 1950s. It developed the online banking platforms that we still use today to manage accounts, and it has also worked to implement contactless payments.
What has evolved between then and now? Fintech organizations have a higher level of public consciousness, with search strings for industry-related results quadrupling since 2014.
What Is Fintech Finally Taking Off After 60 Years?
The reason why financial technology controls a significant portion of the public consciousness today is because of the actions of disruptors. Startups within this industry have taken over a prominent role within their ecosystem.
This activity has led to three standardized trends emerging from the fintech industry as it works to evolve the banking sector.
1. Increased Regulatory Oversight
The cost of regulatory oversight in the United States exceeds $70 billion annually from the post-2008 financial crisis requirements that Congress passed. Citigroup employs over 30,000 people who have responsibilities in this area alone. Restrictions on banking activities, including lending, have also led to a diminished capacity to offer products to consumers. According to Deltec Bank and Trust Limited in the Bahamas, “Fintech seeks to automate many of these processes through data analysis to reduce expenses.”
2. Consumer Improvement Demands
After the financial collapse that happened in 2008, consumers demanded improvements in the banking sector for the services they required. Fintech empowers them to scrutinize potential suitors before signing up for an account, forcing the banking industry into a place where it must provide customized, high-quality experiences. Startups in this area harness the desire for individualized by delivering a clean customer service experience that eliminates legacy tech.
3. Technology Infrastructure Improvements
The financial services industry historically required fixed assets to have scalability. This issue acted as a barrier to entry for anyone who wanted to provide an alternative set of services. According to Deltec Bank, Bahamas-“Fintech allows startups to run the complex operations of the banking sector virtually, creating the rise of neobanks that function purely on tech infrastructure.” Organizations like Revolut have garnered millions of customers without the need to have customer-facing functions.
Where Does Fintech Go from Here?
Only 11% of fintech startups are working on improvements to the offerings of large corporate banks. Most of the research and development in this area focus on the retail segment of the industry.
When institutions embrace fintech, it is primarily on the front-end of the interaction.
If a front-end driven business model is the only emphasis in the banking ecosystem, then the cost to provide services will always be higher. It forces startups to rent legacy financial systems, which is why the emphasis from the fintech industry must be on back-end development. Leasing infrastructure always comes with a risk because the owners of the network could choose to shut it down.
Fintech will continue to develop more personalization opportunities for the banking sector. Startups are embracing this concept already, and the traditional institutions are not far behind.
Disclaimer: The author of this text, Robin Trehan, has an Undergraduate degree in economics, Masters in international business and finance and MBA in electronic business. Trehan is Senior VP at Deltec International www.deltecbank.com. The views, thoughts, and opinions expressed in this text are solely the views of the author, and not necessarily reflecting the views of Deltec International Group, its subsidiaries and/or employees.
About Deltec Bank
Headquartered in The Bahamas, Deltec is an independent financial services group that delivers bespoke solutions to meet clients’ unique needs. The Deltec group of companies includes Deltec Bank & Trust Limited, Deltec Fund Services Limited, and Deltec Investment Advisers Limited, Deltec Securities Ltd. and Long Cay Captive Management.