Fintech is the short form for financial technology, and it is a modern-day movement. Here, technology is used for helping financial services, and it is not a very recent development either. Financial services as an industry introduced the use of credit cards way back in the 1950s, later Internet banking in 1990, and since this millennium, contactless payment technology.
However, in the last three years, the place of fintech in the public conscience has taken off largely. Medium and small-sized banks have identified that technology budgets can be deployed for things besides creating and managing in-house technology support teams.
Ram Chary occupied many roles at Fidelity National Information Services Inc and recently was the Executive Vice President of Global Commercial Services. Previously he managed the technology division of Fidelity National Services Inc, a leading name in banking technologies and payment solutions.
According to him, the term fintech has been inspired by startups. Three trends have led to the surge of fintech, and they are-
- Technology- Financial services were, in the beginning, an industry that needed fixed assets, for instance, branches, to grow, and this was a barrier for newcomers who wanted to enter the market. Technological advancements today permit startup companies to run complicated operations virtually. For example, neo banks function on technical infrastructure only.
- Customers- After the financial crisis that took place in 2008 and other scandals, customers are now more cautious, and they want more from banking services. Thanks to technology, customers can now scrutinize their providers intensely, and upstarts are now using this advantage to offer effective customer service free from the problems from legacy technology.
- Regulation- Enhanced regulation after 2008, on an average estimate, cost the six most prominent institutions in the USA about $70 billion every year. Besides compliance, there are limitations on lending, which has increased the borrowing costs to the consumers and reduced the ability of the banks to provide it. This step has permitted startups to step in and give the targeted audience compelling alternatives because they are not labelled as de facto banks.
Banks are still prevalent in the market today
There is a narrative that startups today are using the fintech landscape to disrupt incumbent banks; however, there is no reason to suggest that banks are now not needed. They are still being used and generate a lot of cash when in business. They co-exist and are still highly in demand among customers in the market today.
According to Ram Chary, the future of fintech is bright. Digital banking has now dominated the scenario, especially after the coronavirus pandemic. Customers now have enormous expectations, and fintech companies and banks are working hard to release innovative solutions and products to attract customers and make them happy with their latest products and services from the comforts of any place. More and more changes will be seen in this field.