The financial technology industry, also known as fintech, has been at the forefront of some of the most innovative payment solutions. This is in answer to a growing number of consumers who prefer to make their payments via their smartphones.
Since the pandemic, a surge of the world’s population sought new ways to protect their health by taking advantage of contactless payments. The negative impact on the economy meant that more consumers opted for buy now, pay later (BNPL) methods of payment. And finally, the need to have more control and take advantage of the growing use of digital currencies has also increased the demand for payment by using cryptocurrencies.
These growing trends have inevitably placed increased pressure on traditional banking institutions to remain competitive amidst the growing number of fintech companies filling these gaps in the market.
Fintechs: The Answer To The New Market
Traditional banking institutions are shrouded in mystery and usually fail to deliver on many companies’ needs. Where they fall short includes having a lack of “immediacy”, a lack of flexibility, and they are generally not transparent with their pricing.
Their validation procedures also tend to be on the heavy side as well as divided. This is why fintechs were originally developed, to answer this gaping void in this new market. Fintechs aim to conform their offerings in order to satisfy their customers’ needs. The primary focal points of fintechs are to adapt their business models to be more customer-centric, offer more flexibility, and provide more innovation.
When they first burst onto the scene, fintechs offered a revolutionary way to improve the user’s experience. They leveraged the heavy use of mobile phones, created “ergonomic back offices”, and they offered all this and more at prices that were affordable.
Now, the focus has shifted to more technical innovation. Some of these focal points include security and data analytics, blockchain, machine learning, etc.
Not limiting themselves to just offering the management of transactions, fintechs are now moving above and beyond this scope to offer a vast array of options for their clients, providing them with that elusive wow factor.
The Future Of Fintech
The challenge for fintechs in the future will be to become increasingly more technical. Banks are now privy to the secret successes of fintech and will likely catch up with the improvement of both user experience and transparency. Fintechs will no longer be able to rely on rock-bottom prices alone.
In order to remain relevant and competitive, they will need to focus on more innovative solutions so that they can continue to deliver exceptional value to their customers.
What makes these fintech companies so nimble is their size. Their teams tend to be small, sharp (given their digital background), with a laser-focused ability to pursue specific subjects.
Fintechs are already at the forefront of this change, while banks are still undergoing a transformation, albeit slow.
Banks, by their very nature, are not known to be agile. As they face increasing competition, especially from fintech companies, they are gradually making the necessary adjustments. As the rules are changing in the digital payment space, banks are beginning to take notice and they are even collaborating with fintech companies.
Without question, fintechs are disrupting and revolutionizing the payment industry. There is clearly a dichotomy that is playing right before our eyes, a combination of both competition and collaboration. This makes it a very thrilling time in the payment industry.
Although it is difficult to really know how many partnerships are forming between fintechs and traditional banking institutions, one thing is certain, this is the new normal in the payment landscape.