Financial Technology Set To Revolutionize The Banking Sector
Looking at the way technology has disrupted industries like retail and entertainment, there is no denying the fact that the banking sector is probably next in line. Already, the banking sector makes use of a lot of information technology to carry out its activities. Instead of waiting until a decade to come when the total landscape will have changed to contain only those operations that can make use of information technology, it is better to be proactive now and take steps towards anticipating the day when financial technology finally becomes the norm.
Finance in itself entails sharing information. Its main areas of payments, savings and insurance require that information be shared intra and inter companies. Most financial operations today are done through banks and insurance. People need to know what is happening to their money at any point in time. some people are interested in understanding how to invest their money while others are more interested in knowing that their savings and investments are save. There is need for this information to be available in real time. Today, the banks are there to help create and manage wealth while the insurance companies are there to manage the risks that come with wealth creation.
Although technology seems to be everywhere, it may be surprising for some why we have to talk about financial technology or Fintech as it is popularly called today. This is simply because the existing systems like banks have failed. Banking so far has been filled with a lot of poor management, unethical behavior with a lot of them at the center of the financial crisis rocking the world. Andrew Haldane of the Bank of England is quick to point out that there is a financial revolution in the making. According to him, it would seem that the existing financial institutions have become inefficient with many experiencing no noticeable change over many decades. Interestingly, that many banks have been able to survive post 2007 has been due to help from their governments.
Read More : International Travel: Tips for Staying Healthy
There is hope that with the coming of new technology, a lot will change. Firstly, there is hope that payments will be cleared faster at least for intra city transfers. It is still a wonder why in this time and age payments have to take more than two days to clear. It is fairly obvious that this is because banks are counting on such money for their float. If the idea of distributed ledgers held on different networks, is promoted, the possibility of making real time payments become more real.
Secondly with financial technology, peer to peer lending which eliminates the mediation of banks can be promoted. Actually there has been some noticeable growth in peer to peer lending. The idea is that with the banks out of the way lending can become easier and cheaper. It is also hoped that with fintech, insurers will be the big winners. With the right technology, they can gain insight into the health or driving status of their clients easily. Worthy of note is the fact that technology comes with security issues but this should not be a deterrent factor.
There are obviously great benefits to be had from using financial technology in the banking and insurance sector. However, what is important is to ensure that these benefits trickle down to the masses and not just end somewhere around the top.
Here are the top 5 advantages of financial technology for the banking industry
- Through Fintech, banks are able to find new avenues of innovation within a controlled framework. Considering that FinTech’s are less bureaucratic, they can take on new projects, change and correct errors on the fly without spending a lot of money on large investments or waiting for long periods of approval.
- The Fintech industry also provides new business opportunities by connecting companies with new markets and offering products that meet the needs of customers more effectively. With alternative credit scoring, credit profiles can be created accurately and unexplored segments can be tapped into utilizing technology that uses artificial intelligence and metadata.
- Financial technology also provides real-time access to information. With advanced machine learning mechanisms, businesses can better understand their customers’ needs and improve their services. As a result, institutions like banks can better understand client needs and make more assertive decisions about loyalty.
- Is it possible for financial institutions to prevent fraud? New financial technology also improves security. Since fraud is becoming increasingly imperceptible and harmful, good systems for protection are needed. The consequences of a security breach can be grave, such as losing a large number of customers. To ensure their clients’ financial health and trust, institutions must have a reliable security system.
- Last but not least, financial technology is cost-effective. When it comes to credit scores, all manual processes are avoided, preventing any human error that could lead to economic losses. Likewise, it enables payment collection to be much faster and more efficient, thereby reducing customer confusion.
