Fintech: Introduction

Financial technology, frequently called “fintech”, is now a most used buzzword. Startups typically challenging with common financial services, offering customer-centric services capable of combining speed and flexibility, are extending throughout the world. They are drastically adapting the expectations and the active engagement of potential customers. Customers enjoy more and more a digital perspective, characterized by a nearly complete immediacy and availability of the accurate information, enabled by technological gadgets such as smartphones and tablets, and by other trends such as the Internet of Things (IoT).

Traditional financial organizations, such as banks and insurance companies, are changing, with the aim of reducing the technological gap among them and the fintech startups. However, their chosen paths toward necessary change and innovation are full of hurdles. Old methods never overhauled and rigid business models are one of their main issues to deal with. Fintech companies are typically involved in a process of “disintermediation through innovation.”

Everything (IoE), contextually with a by far more effective exploitation of digital channels and mobile devices, are levers that are permitting them to reshape the financial services’ industry. These possible solutions give the market with innovative adding-value solutions, backed by modern strategies and up-to-date business models.

Fintech organizations, mainly startups, are reshaping the financial services’ industry, offering customer-centric services capable of combining speed and flexibility, backed by modern strategies, and up-to-date business models.

In the last few years, there have been major changes in the banking and financial sectors. The possible causes are several, such as the impact of the 2008 financial and economic crisis, the increasing regulation of incumbent players, and the social and behavioral changes in the customers. In the last few years, the digital transformation is the most important catalyst behind the fintech episode.

In order to be economically viable, fintech firms quickly need to attract massive quantities of assets. There are two key factors for this: the number of customers and the average amount of assets per client. Even if they typically attract massive numbers of young customers, fintech startups will still struggle to reach a considerable profit as long as younger generations’ wealth remains low. It is possible that fintech firms have time to increase in parallel with younger generations’ assets, and finally become profitable. There is no guarantee that they will be capable to retain these customers. As younger generations age, they will face more and more complex savings challenges. Innovative solutions such as the robo-advisors presently offer only basic solutions that are not always been acceptable to these demands. Robo-advisors are ideal for customers with few assets who typically want to avoid high bank charges, while traditional institutions aim toward customers that tend to have more assets and require much greater expertise. Fintech companies will struggle to create money if they lose their potential clients as soon as they become profitable.

Conversely, if the traditional players are to engage with profitable customers, they will have to evolve and offer the same or higher standards of interactivity and consistent profitability as their fintech rivals.

Today’s fintech solutions such as the robo-advisors are just one typical example of the way incumbent companies are innovating in order to transform their customer relationships and offer innovative approaches in financial services. For the time being, private banking customers receive this type of service. However, in the near future, thanks to fintech startups, a broader range of customers will receive this type of services. This is the exclusive way the sector giants can remain the transition from consumers to users.

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