Banks are trying to adapt to the changes that happen in the financial sector due to the development of technology. Alternative finances are now in the center of attention when it comes to making transactions. Even though not all people accept the transition to using the non-paper money, the change affects the way people perceive and use financial services, so there is a poignant need for spreading information regarding this topic.
The concept that describes the impact of technology on finances the best is called FinTech. This article is going to cover the relevant information regarding this topic. From definitions to advantages and disadvantages, here’s what anyone should know:
Is banking truly changed?
Some people believe that traditional banking didn’t change that much since the apparition of disruptive technologies. The change is not that evident because not everyone stumbles upon the changes. The people who encountered the improvement of financial services in the past few years to work in the business field. Making payments more rapid and efficient was always a goal for businessmen.
Using services that seem to improve the speed, frequency and safety of transactions will leave traditional banking behind, especially when referring to paper-based money. Not taking into account cryptocurrency and blockchain technology, which are disrupting the whole financial sector anyway, businessmen are looking forward to using alternative banking instead. Digitalizing all processes that involve paper money and bringing transactions into the online field was a step further in transforming the way people handle payments.
The ever-changing financial environment is now oriented towards reforming the regulations by allowing digital models and native products or services to disrupt the industry. People have to remain open to change, as alternative banking starts to become mainstream.
Traditional banking versus FinTech
The controversy between traditional banking services and FinTech services is going to be visible for a while. The argument that sits between fully accepting FinTech instead of traditional banking has to do with security. People consider that paper-based money can’t lose its value, while over-the-Internet services offer people no physical guarantee that their money is safe.
With all the cyber attacks happening lately, this fear is justified. Technology advances and becomes safer, but hackers become better too. The risk of cyber attacks will always be present when referring to anything that’s stored in the online environment. Luckily, blockchain and similar types of technologies are now using encrypted information. Carrying out transfers might be safer by using traditional banking methods, but it is not free of risks either.
Yet the benefits of FinTech are attracting more and more users every day. First benefit worth mentioning refers to the power of FinTech to monetize data itself. Adding value to data leads to increasing the power of the economy, by digitizing it. Structured access to data, which is – in this case – unlimited along with using smart algorithms to interrogate it makes all financial services more efficient.
For businesses, FinTech makes its presence felt by improving and extending payment systems, by handling CRM (Customer Relationship Management) better and managing every process electronically. FinTech influences the customer experience and reduces the costs that the company had to involve in compliance and integrating bank accounts.
A possible collaboration between the two
People are wondering what would happen if both traditional banking and FinTech would have collaborated in the first place. Well, regular banks were first reticent to the idea of a partnership that involves FinTech. The users of alternative banking methods are trying to convince people to migrate from traditional banks to their services. It is a subjective matter, but there are some collaborations that might be beneficial for both parties. The whole FinTech ecosystem represents a competitive force in the detriment of traditional banks, and they perceived it the same.
But, in time, once the benefits of FinTech started to be more visible, the banking industry saw it as an opportunity and left some room for a potential collaboration between the two. The fresh vision of FinTech solution combined with the information and security of traditional banks could lead to something greater. The new FinTech players would be happy to collaborate with traditional banks in order to encourage the overall progress of the finance industry. This may happen in the future on a larger level, but – for now – people tend to separate into two opposite sides – traditional versus alternative banking.
White label banking
White labeling represents a legal manner to place one’s brand over a product that was produced by someone else. White label banking encourages new FinTech players to provide financial services by using products from a provider that categorizes as a white label.
A financial delivery system is composed of retail distributors, FinTech companies, a white label Provider and a licensed bank. This is the perfect example of a collaboration that could lead to great things in the future. White label banking and payments unlock potential opportunities for people who want to invest in FinTech and encourage adopting the new ways of handling finances.
At the moment, startups that want to promote alternative banking need all the support they can use to launch and obtain success soon. White label banking can offer them exactly that, by encouraging using other methods besides traditional banking. People might start trusting alternative financial services more if a lot of companies start activating in this industry.
What to expect from the future?
But what should people expect from the following years? Besides alternative banking methods, more services will start to emerge. Neobanks and challenger banks which are supposed to compete with traditional banking methods will be founded. These are focused on making transactions using a smartphone only. Another trend will include using Artificial Intelligence bots which should improve the customer relationship sector, analyzing risks better and many other aspects of the financial world. Specialists predicted the apparition of a new concept, called FinTeX, which will involve using blockchain technology for all financial transactions. Decentralized startups should be at the center of attention for the next few years.