FinTech : Driving Transformation across Finance Industry

Financial Technology, often referred to as FinTech, is reshaping the way Financial Services were being offered. There has been a huge improvement & ease while availing Financial services now.

We can easily send money to our friends and family via PayPal, PayTM or Google Pay in a few clicks; Small Businesses can now process business transactions with ease, a cheque can now be easily deposited within minutes via Mobile Banking Apps – Just click a photo & deposit, you don’t have to go all the way to the Bank.

This is “FinTech”, tech transformations in the Finance industry & it is just the beginning.

Many FinTech companies are advancing with innovative and technological solutions in areas such as online and mobile payments, big data analytics, alternative finance, investing, financial management & other operations involved in the Finance Industry.

FinTech is also active in domains such as cryptocurrency, smart contracts Automation (buyers and sellers), Robotic Investment advisors.

Below are some FinTech stats to look out:

• The Global Financial Services Market is expected to reach a value of nearly $26.5 trillion by 2022, significantly growing at a CAGR of 6%. [Source]
• E-Commerce is the key application segment of the Global FinTech market, estimated to grow with a superlative CAGR of 10% to 12% through to 2025. [Source]
• Regulatory Technology (RegTech) and Blockchain are the fastest-growing segments of the fintech industry.
• The FinTech market report in Asia (particularly China & India), shows that the region has the fastest growth in fintech consumer adoption. [Source]
• Ant Financial is the biggest fintech company globally, with an estimated worth of US$75 billion. [Source]
• Mobile payment solutions (a subset of digital payments), is on track to break the USD 1 trillion mark in 2020 [Source]

This is making the world go digital in finance where your money can be exchanged online, stock markets are accessible at your fingertips, and investments can be done with direct interaction.

Let’s dig deeper to understand some of the most interesting questions around FinTech you’ve never wondered about:

• How FinTech rose from the ashes of the Global Financial Crisis 2007-2008?
• How FinTech is transforming the Small & Medium Business Landscape?
• How FinTech came as a boon for Small Merchants?
• FinTech Companies vs. Established Financial Institutions: Who Will Dominate the Market?
• How FinTech has transformed Financial Services from Product-Centric to Customer-Centric?
• The rise of Artificial Intelligence (AI) & Natural Language Processing (NLP) Powered Chatbots in the Banking Domain

Let’s get started –

1. How FinTech is Transforming the Small & Medium Businesses Game?

Fintech has been a key game-changer for entrepreneurs, making it easier for startups and minor businesses to process payments, secure loans, manage the workforce, track expenses & monitor cash flow, & a lot more.

1.1 Ease of Funding

Small & Medium businesses need loans to either get started, operate or expand.

A few years ago, there were a lot of structural issues that caused difficulties in dealing with traditional financial institutions for getting a personal/business loan, such as numerous visits to the bank & the requirement of an endless list of documents with high turnaround time.

If you are an entrepreneur & have applied for a loan before the rise of FinTech, you would understand this situation like no-one else.

But THANKS to Fintech, the entire process has been transformed by putting an end to the struggles faced by entrepreneurs and small businesses for a very long time.

Tech innovations in Finance have made the loan processes online, paperless & of course convenient, by bridging the gap between financial institutions & business/customers.

You can now initiate the loan application & submit documents online with your smartphone or laptop.

These streamlined operations in the Finance industry can help you get a loan within a week or sometimes even faster.

In 2017, online lenders (FinTechs) were the 3rd largest source of SME funding in the United States, accounting for 24% of all business lending.

A Glimpse of PayPal’s Latest Milestone in Small Business Loans:

In May 2019, the global FinTech leader Paypal announced it has provided more than $10 billion in loans to more than 225,000 small businesses around the globe.

“It took PayPal twenty-three months to get to the first $1 billion in lending and now we’re hitting more than $1 billion per quarter,” said Darrell Esch, vice president of global credit at PayPal.

1.2 FinTech Evolution (Cards to Mobile Payment Solutions) – Boon for Small Merchants

FinTech has changed the way payments are processed between customers & merchants.

It has evolved from Debit/Credit Cards to Mobile Wallet Solutions & Unified Payments Interface (UPI) – providing a lot of convenience to both the customers & businesses to transact.

Accepting payments via credit/debit cards is still a good option to process payments digitally but for small merchants, purchasing machines to accept payments via cards is not always an optimal solution.

This is where mobile payment solutions came as a boon for them – allowing them to accept payments alternative to cards by just sharing a QR Code or Mobile Number.

Because of the convenience & ease of transacting via mobile – Mobile Wallet Solutions & Unified Payments Interface (UPI) dominated the Indian market, below are some stats that might excite you –

• Over the past few years, India has witnessed tremendous growth in digital payments & this growth is mostly driven by mobile payment solutions.
• As per RBI annual report (2018-19), UPI transactions overtook debit card payments: about 5.35 billion UPI-based transactions recorded in FY19, compared to 4.41 billion debit card payments
• According to G2 Crowd, “the worldwide volume of mobile payments will grow by 60% over the next two years.”

PayTM, PhonePe & Google Pay are some popular mobile wallets & payment processing apps in the Indian Market commonly available & accessible at Tea/Tobacco Shops & Other Small Vendors Across Streets in India.

1.3 Accounting Softwares – Allowing Small Businesses to Monitor Cash Flow

To thrive & succeed in business, you need to keep a sharp eye on the business cash flows – payrolls, taxes, expenses, contract payments, deductions & more.

Therefore, it is very important to have a streamlined accounting process in business to monitor these cash flows in real-time to further smoothen business operations.

Years ago, small business owners that could not afford hiring accountants used to take this responsibility on their shoulders – ending up facing issues and investing a lot of time.

But with technology innovations, many FinTech companies have introduced accounting apps (expenses tracking, invoicing, etc., ) that are free to use.

Business Owners don’t need to have IT Skills or Accounting Knowledge to operate these softwares – creating a lot of ease for them to track expenses by saving time & efforts without spending money.

2. Business Alliances – From Disruption to Collaboration

The Global Financial Crisis of 2007-2008 gave birth to technology innovations in Finance Industry.

As the consequences of this crisis started to emerge – people lost their jobs & families lost their homes. But most importantly – people started losing their trust in the financial institutions that were meant to offer them financial support.

This led to the rise of companies that innovated technologies which slowly started to disrupt the financial services industry.

The Financial Services ecosystem is still in a state of transformation. New FinTech startups are entering into the marketplace regularly while the Established Financial Institutions ( Branded Banks) are investing significantly to keep up with the latest digital offerings & capabilities.

Let’s have a look at the beneficiary attributes offered by new FinTech Startups:

• Agility
• Innovation
• Cost Reduction
• Customer Experience (Most Important)
• New Products
• Data Handling

But despite the technology innovations, these FinTech companies could not replace traditional Banks (branded & trusted financial institutions) because consumers feel comfortable to keep their money & maintain their long-relationships with a bank.

Initially, the Banks were slow in driving technological changes due to the legacy of organizational and cultural hierarchies.

But now, they are more attentive than ever.

Some Beneficiary Attributed Offered by Branded & Trusted Banks

• Risk Management
• Infrastructure
• Regulations
• Customer Trust (Most Important)
• Economies of Scale
• Brand Name
• Capital

The most common reason people don’t use payment solutions by FinTech Startups is concern over security standards.

These digital payment-processing companies essentially have to invest in patching up security holes and show consumers the suitability of their services balancing everything else.

Implementing this would certainly help in expanding their footprints across markets.

FinTech Companies will continue to disrupt the Industry and these Established Institutions don’t like to be disrupted.

This competition looks to be foreseeable and indeed the struggle for market shares often leads them to clash with each other.

However,

In recent times, conventional banks and FinTech companies have been looking forward to collaborating with each other instead of reinventing FinTech because now they understand that collaboration may be the best road to long-term success in their industry.

In 2017, 88% of incumbent financial institutions feared that they would lose money to the disruptive innovation of fintech companies, but 82% plan to partner with fintech startups in the next 3–5 years. [Source]

In 2018, almost 70 percent of senior banking executives said that teaming up with Fintechs and Bigtechs to create a new service was a significant opportunity for banks.

MasterCard is one such project that provides backing for entrepreneurs to start their projects in domains like banking, AI, security, and logistics by giving them access to the MasterCard ecosystem.

This partnership helps them bring together services to the customers that are more convenient by offering customers an optimized experience and security in Financial transactions.

3. Finance Industry – From Product-Centric to Customer-Centric

Over the past years, Tech innovations have made us all adapt to customer-centric solutions – built with the consumers’ needs in mind

This change in consumer behavior is the biggest trend that gave rise to the rapid growth of Innovations with the Customer-Centric approach.

In order to remain competitive & relevant in the market today, adopting this approach has become crucial.

So the key players in the Finance Industry are now working on implementing stable and scalable technologies to create a smooth experience for customers – engaging with them in a better-personalized way – at the right place & time.

Or say, Moving From Product-Centric to Customer-Centric.

3.1 Artificial Intelligence (AI) & Natural Language Processing (NLP) Powered Chatbots

FinTech is intensely adapting automated customer service technology – utilizing AI & NLP powered chatbots to support customers with a better-personalized experience & their basic queries and keeping down the staffing costs.

These Chatbots are improving the digital customer experience for services such as banking, insurance, investment, wealth management & more.

Below are some of the key features of an advanced AI & NLP Powered Chatbot for the Finance Industry

1. Reducing Turnaround time of numerous tasks

2. Availability 24*7 – Addressing Customer Queries by Learning from customer feedback, Scheduling Appointments & more.

3. Language interpretation capability

4. Easy to Understand Interface – with features for better interaction

5. Seamless Lead Generation – Learning from past customer preferences for the right product recommendation to the right person.

Not only Chatbots, but there are also numerous other AI & NLP backed innovations being carried out by Industry Leaders to offer improved customer experience in the Finance Industry.

Processing data using NLP & AI can create a more diverse, stable & streamlined banking landscape in the near future.

Conclusion:

FinTech is expanding its impact and marking its presence in the digital world exponentially. It’s time we adapt to the contemporary ways of business.

Technology will continue to dominate & bring a high degree of change to nearly every area of our life by transforming perspectives towards the traditional approach.

You can’t ignore the rise of EdTech & how everyone is adapting to the tech transformations in the Education industry. The traditional teaching approach & 4-walled classroom only system is getting pretty close to extinction.

Similarly, the Finance Industry is no exception.

If you are also looking to tap into the FinTech market, we will be a great partner for you. As a leading mobile & web app development company, we have developed numerous Technology Solutions for our clients across the Globe. Let us translate your idea to transform the Financial Services into a reality – Call/Whatsapp +91-9501620330 or send an email to letstalk@quokkalabs.com