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All industries have their own set of challenges to steer through. In a similar fashion, fintech has some hurdles of its own. With pandemic-induced uncertainty, the fintech companies have various issues on multiple fronts. Despite technology infiltrating everyday financial transactions, many financial markets across the globe face difficulty because of an inclination to a cash-based economy. Fintech is working towards building a cashless economy and this preference for cash amongst the majority of the population is a major obstacle. However, the pandemic has led to a massive shift from a cash-based economy to a digital economy for a majority of counties in a short period of time.
With technology disrupting the finance industry, traditional banking companies took the situation into account and considered modernizing the customer experience. As a result, these improvements in processes gave way to ‘mobile-first' thinking. Therefore, now fintech companies are actively launching services across geographies, which are further giving way to the latest trends. However, the evolving nature of the relationship between fintech startups and traditional financial institutions poses a daunting challenge.
Financial institutions have started working in collaboration with fintech startups in different ways but with both parties having their own rules, the collaboration poses many hurdles pertaining to size, efficiency, and acceptance. Although, fintechs have helped improve the products and services offered by traditional financial institutions. But a central issue is the risk of breach of cybersecurity, which involves users sharing their personal information on a fake website that looks like a legitimate one.
Traditional banks had started by collaborating with small Fintech startups to understand the shifts in customer expectations, be comfortable with the prospect of fintechs taking over, and leverage the company’s expertise in the digital realm. Over the years, this collaboration has now become a necessity for companies to deal with legacy processes, corporate structure, and business models that make it difficult to innovate in-house. More and more banks are choosing to innovate by partnering with Fintech startups.
For centuries, banks have played as gatekeepers of most financial services ruling the industry. It began with payments being unbundled by gateways like Paypal, Paytm, and others and now, technology is playing a key role in unbundling lending and wealth management. In addition, Non-Banking Financial Institutions (NBFCs) are also playing in the terrain of traditional banks with a certain amount of tech knowledge in the industry.
While the focus is shifting to cybersecurity and data privacy, Fintech startups alike are making considerable investments to prevent any financial fraud.
Fintechs have made a way for convenience and accessibility for the consumers. As a result, opening an account at any of the banks is as easy as a breeze. With an increase in the use of technology and digital platforms, there’s greater transparency in showcasing charges and fees up front along with simplified financial jargon. Payment apps have added functionality and easy understanding of insurance, gold investments, mutual funds, and much more. Anyhow, finance has a perception of being complex and fintechs need to find a way to tap that hurdle.
Personalization has been the core characteristic in banking for a long time. However, today personalization means much more than just interacting with a user, they need a solution tailored to their exact needs. Therefore, Fintechs have a valuable opportunity to create a differentiator between traditional and neo banking by delivering a more personalized user experience.
Moreover, users are accepting fintechs as their financial wellness coach despite feeling overwhelmed with a wide range of options. In any case, effective personalization provides them only with the options they actually are looking for.
No doubt fintechs are the future. The disruptive potential of fintech companies not only provides better ways to financially operate but also motivates traditional banking to modernize the finance sector. This paints a promising picture for the fintech sector and the finance industry as a whole. However, keeping a track of these developments is much easier with finance and investment conferences, such as Money 2.0 Conference. It provides a platform for concerned parties to learn about the latest trends and devise an action plan to approach these trends.