Financial services businesses have been around for ages. Any company that helps clients hold, exchange, manage, invest, or do any other similar money-related task could fall within the financial services category. Over the last few years, the explosive growth of FinTech has taken the financial world by storm. And if it were an actual storm, the centre is where every financial service company should be aiming for. New innovations are brining drastic change to finance and business. The companies that keep up could see great benefits. While those who don’t risk falling behind their competition.
In this blog we’ll go over what FinTech is, some examples of its applications, how new technologies are changing financial services, and how finance businesses can significantly reduce operating expenses by modernizing their systems, software, and processes to keep up with the latest technologies.
What Is FinTech?
FinTech essentially refers to the use of technology to modify and improve financial services. Financial technology isn’t new. It’s been around for years, and even things like ATMs and computerized banking systems can be considered the financial technology of their time.
However, technology has come far, and the age of the internet has allowed financial technology to reach a new stage of its growth. Modern FinTech covers a wide range of services, technologies, and capabilities that are changing how businesses do things.
At its core, it seeks to provide two things: accessibility and efficiency. While it may have once revolved more around back-end business technologies, FinTech is now transforming how financial services are delivered and used by businesses, consumers, and individuals.
Examples Of Financial Technologies In Practice:
“FinTech” covers a broad array of old and new technologies that somehow relate to money management. Here are some examples of common FinTech innovations:
Cryptocurrency And Blockchain: Blockchain technologies were created to serve as an alternative to traditional cash. Cryptocurrencies, crypto wallets, exchanges, NFTs, and other blockchain-related innovations are all prime examples of FinTech.
Online Payment Gateways: Businesses that specialize in online payments make transactions quick and easy. Such services have made a transition to mobile payments in the last few years, making payment apps even more accessible and convenient for everyday use. Payment gateways have made it easier for consumers to buy and for small businesses to access efficient Point-of-Sale (POS) systems.
Banking Apps- All modern banks have kept current with trends in technology. With the help of FinTech, personal financial services have become widely and easily available. Most banks offer a full-suite of financial management features within a single app. This includes paying bills, managing various accounts, holding cash, withdrawing cash, making instant payments, etc.
Investment Software and Robo-Advisors: Investment apps make it easy to buy and sell various stocks, foreign exchange, and cryptocurrencies on your own, usually for a small fee. Robo-advisors take investment apps a step further and can use AI to make informed decisions and automatically invest for you.
Insurance Technology: Also referred to as insurtech, have been developed by insurance companies to enhance the delivery and accessibility of insurance services. For example, automating insurance procedures can reduce response time to claims. Advances in security can also help mitigate fraudulent claims and theft. One of the most notable insurtech advancements is the implementation of systems that monitor driving, which helps may help drivers save on their auto insurance rates.
Crowdfunding Platforms: Crowdfunding services allow businesses and individuals a means of gaining capital outside traditional banking and loans. They essentially enable people to send and receive money over the internet and pool funding together for a specific project or purpose. For example, someone creating a new product can now secure funding from investors who’d like to buy or pre-order their product without needing to secure a business or bank loan.
Personal And Professional Accounting/Budgeting Apps: Accounting apps make financial management easier for businesses and individuals. These applications track income, spending, and can help when it comes to paying salaries or bills. They remove the need to create, navigate, and track everything on a spreadsheet, revolutionizing the way people manage their money.
Where do financial service companies and financial technologies meet? Well, one doesn’t go without the other. Companies that call themselves ‘FinTech companies’ still fall part of financial services. And any traditional financial service company that wants to remain relevant must invest in new technologies.
Look at banks as an example. They’ve been around since the 18th century, and all successful banks have kept up-to-date with current technologies. Before, you’d have to visit a bank and wait for money to be hand-counted. Next came ATMs and card payments. Today you can make payments with your smartphone or even smartwatch, powered via technology and the internet.
The banks that remain in business are those that consistently update their systems, software, and functions to keep up with market demands as the world changes. The constant FinTech improvements make businesses faster and more cost-effective, allowing them to make their services cheaper and more available than the competition.
Cost Savings: One Of The Biggest Benefits
One of, if not the most, appealing reasons to invest in financial technology from the perspective of a financial services company is that new technologies can significantly reduce costs going forward. Keeping costs down is crucial for any business that wants to provide their services for a reasonable price and remain competitive in the market.
Here are eight ways implementing FinTech can reduce a business’s operating costs:
- Moving To The Cloud: Can help financial services businesses save costs in several ways. Most notably, moving to the cloud can help reduce overall IT and data security expenses.
- Process Automation: Automating tedious, repetitive, and recurring tasks can streamline processes and reduce the amount of manual labour required. This can reduce labour costs while allowing tasks to be completed quicker and with more accuracy, which may result in additional revenue benefits.
- Outsourcing Non-Core Tasks: Outsourcing certain tasks or functions can help reduce labour costs and free up internal resources to focus on more important tasks.
- Increasing Efficiency: Modern software strives to be more efficient than its predecessors, and can help reduce waste and eliminate redundancies, resulting in significant cost savings where newer systems are implemented.
- Leveraging Big Data: Big data can help financial services businesses make better decisions and gain insights that can lead to cost reductions. For example, a business may discover where expenses are wasted and where they’re more effective, allowing it to make better-informed decisions.
- Adopting Mobile Technology: Mobile technology can help reduce costs by providing customers with more options and increasing efficiency of delivered services.
- Leveraging AI and Machine Learning: AI and machine learning can help automate processes and reduce costs associated with manual labour. For example, smart systems that can automate data management, making it easier to store, manage, retrieve, and analyse company data.
- Utilizing Blockchain: Blockchain technology introduces security features that can help reduce costs associated with authentication and verification.
A Brief Look At The Additional Benefits
FinTech doesn’t only reduce costs. Any of the cost-reducing technologies listed above can help the business in other ways. We won’t take a deep dive into them here, but some of those benefits include:
- Revenue enhancement
- Improving customer service and experience
- Better customer outreach
- Having better security
- Increasing transparency
Although there are many other benefits financial service businesses can gain from FinTech, those listed above are among the most significant. In fact, most FinTech efforts would likely seek to gain the most from all these benefits while reducing the business’s operational costs.
Financial technology is eating the pie of traditional financial service companies. New and innovative solutions are more secure, efficient, transparent, and cost-effective. Companies that want to stay competitive as FinTech revolutionises how the world handles money need to keep up.
The things discussed in this blog only scratch the surface of what FinTech can do for finance businesses. Process automation, AI, and machine learning can help you get big tasks done quickly and easily, Big Data can help you make well-informed financial and strategic decisions, while mobile and cloud technologies can make your services more accessible. Overall, modernizing and implementing FinTech help you do business faster, with more accuracy, and with minimal costs.
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