When we talk about Fintech what we really want to express is a change in the financial paradigm, including the banking sector. It is clear that in recent years the evolution and transformation of fintech has been vertiginous, but… do we know to what extent it has affected the digital transformation of banking? Let’s see how the banking sector can benefit from technology to create more attractive financial products and tools to meet the real needs of users.
Fintech, banking technology solutions
We can say that the term Fintech refers to all those companies or solutions that are responsible for creating technological alternatives to the traditional financial market. Some of its main objectives have been solutions for payment methods and the optimization of banking operations.
What has your application resulted in? More efficient solutions, products and systems that provide better service to customers. Logically, those banks that have opted to implement them have been rewarded with an increase in the number of users.
Fintech positioning within the banking sector has been done through different ways:
- Offering innovative services and improving existing ones through technology. This includes Artificial Intelligence (AI), creation of efficient platforms, more specific and complete software, security tools, etc.
- Eliminating intermediaries to make banking operations simpler.
- Creating financial products that respond to users’ needs, including improved accessibility for its users.
- Creating solutions under an Open Finance perspective, that is, facilitating the exchange of financial information.
But let’s be more concrete and talk about some examples of how Fintech has stimulated the process of banking transformation:
- Financials consultation from a single app on a mobile device. No matter in which banking institutions they have their products.
- Quick knowledge of different financial products in different entities. All this, without the need to move between platforms, since they can be done from the same point.
- Obtaining a personalized banking service, since companies know the needs and financial habits of their customers.
- Easier product contracting. Thanks to the fact that banks have a very large database of their users.
- A better user experience allowing banking transactions to be carried out in less time and focusing on simplicity with intuitive and fast platforms.
What key aspects do Fintechs see as key to banking transformation?
We can describe six fundamental aspects with which Fintechs are conceiving the technology transformation for the banking sector:
- The automation of each process, through the use of AI software, learning from user actions. In this sense, they will be able to offer a quick response to your doubts and will help you in your different operations.
- Conversational banking, through applications that include messaging. This improves customer service, positively impacting the customer experience. This increased satisfaction leads to customer loyalty and customer growth.
- Technology regulation or Regtech, which includes data protection, regulations and risk management, among other aspects. It has a wide range of applications such as monitoring transactions with virtual currencies. It is essential to create a secure networking space for customers.
- Banking decentralization or Open Banking, sharing the use of information among different entities. It offers many opportunities to users and facilitates their financial transactions.
- Electronic wallets, with mobile banking options, app and use of digital currencies such as cryptocurrencies.
- Analysis based on macroeconomic and social aspects that allow the creation of more accurate investment or business models.
Advantages of Fintech for the banking sector and its transformation
Trends in the financial sector point towards the concept of Open Finance. In addition, this may favor the association of banking companies with other companies in the fintech sector or the creation of proprietary technology solutions.
These alliances between the more traditional banking sector and technological solutions offer many advantages to banks:
State-of-the-art technology allows for increased early detection of fraud, through the behavioral study of users. This security contributes to greater customer confidence.
They will also be able to provide secure transactions such as transfers, credit and credit card issuance. Users’ data will be protected and their information is free of risk as it is less exposed.
Fintech provides greater profitability to banking companies. Thanks to these strategic partners, they increase their growth opportunities by being able to concentrate on the development of new products and tools without having to invest in their own development.
These growth alternatives may even include obtaining new customers through other companies or third-party applications. The benefits are obtained without the cost of doing so with the entity’s own resources.
Diversity in services
Banks can diversify their loan and investment portfolios and tailor them to clients’ needs. This will make it possible to offer new financial products with a higher level of customization. This “tailor-made banking” will allow banks to distinguish themselves from other competing entities that only offer homogeneous products to their customers.
Thanks to technological innovations, it is possible to provide better customer service, based on the customer’s own previously expressed preferences.
A clear example would be the elimination of steps, normally perceived as a tedious process by customers, streamlining procedures as much as possible. The objective would be to have a platform where each operation is performed in seconds and without security problems.
Automated processes will require, however, efficient and reliable identity verification processes, without being a hindrance to users.
One of the main benefits that banks gain from having a greater deployment of Fintech technology is to obtain the patterns and trends that users follow. In this sense, we have an extensive database in the cloud that allows us to identify needs, even before the user is aware of them.
A common future: Fintech and banking
The coming years point to a democratization of financial services. As a result, it will generate great competitiveness within the banking market. It can be said that this is the beginning of a new service sector and Fintech is emerging as a service provider that will be essential for any entity.
A logical evolution
The focus of these companies will continue to be the customer, finding ways to anticipate their requirements. It will bring a new dimension to banking compared to how it is currently conceived and will result in increased engagement or loyalty through a more satisfying experience.
Increased supply will also raise the standards that users will demand. In this context, the Fintechrather than competition, they will be one of the best allies for the banking sector.
The change in the consumer, and the way they manage their money, will encourage this evolution. The logical trend will be towards hyper-personalized, simple and fast services. Any transaction that cannot be processed in seconds will be a source of frustration that can cost us the customer.
Digital transformation will eliminate this line between the virtual and the physical, producing a balance between both spheres. What will we have as a result? Business opportunities, new customers and increased revenues. In this case, it will be essential to have a solid marketing strategy that will allow us to make all our capabilities known.
Many point to the fact that the Fintech technology sector will be assimilated, sooner or later, by the bank. It is true that many banks are already creating their own solutions and technology departments. This is despite the cost of implementing such strategies.
Overcoming potential gaps
There will, of course, be many challenges in the process of digital digital transformation of banking. Among the main barriers that could arise is the procurement of users. An education process will be needed. This is especially true for those who do not have a connection to technology or have a greater deficit in financial literacy.
The use of personal data is another area of great concern to customers. Therefore, it must always go hand in hand with the respective security protocols and a policy that is updated to the legal framework in order to offer guarantees. Consumers want to feel secure in this regard. If they believe that their information can be stolen or that unethical use will be made of their data, it is very difficult for us to gain their loyalty for our bank.
Cybersecurity, user protection policies or the security of operations. These are fundamental aspects that every banking company must consider as one of its top priorities and must always ensure that it complies with the most rigorous market standards.
Petri Alonso, Director of Banking and Insurance in Grupo Oesia.