Role of FinTech in Banking and Finance Sector.

(By Daksh Pawar – F.Y.BAF)

FinTech is no longer a jargon of the banking industry. Instead, it has become a familiar term
in technology in general. Firstly, we must know what FinTech means. The term FinTech is
derived by joining two words which are financial services and digital technology. In a
nutshell, FinTech simply prompts the use of digital technology by startups to come up with
innovative products and services such as mobile payments, alternative finance, online banking, big
data, and overall financial management .FinTech was introduced as a technology that was
used at the back-end systems of financial institutions and banks. However, since then its
definition has changed significantly. Now it encompasses several applications that are
consumer based. By 2023, you can trade stocks, manage funds, and pay for your insurance
and food via this technology. The Global investments in FinTech ventures has doubled to a
whopping $112 billion as compared to $51 billion last year. This is more than evidence to
prove that the digital revolution is at the doorsteps of financial services sector. This
revolution is having a huge impact on all the banks and financial institutions globally.
The FinTech for banking has impacted numerous applications and revolutionized the way
consumers access their finances. Its impact ranges from mobile payment apps to investment
and insurance companies. This profound impact of FinTech can also be seen as a potential
threat to the brick-and-mortar or traditional banks.

In today’s digital era, customers are not keen to go for services provided by the traditional
financial services industry. Instead, they prefer services that are quick and safe. This is the
reason why FinTech is gaining popularity and causing disruption in the banking and other
financial services. FinTech has spread widely across the globe and has impacted the life of
numerous people. Since 2016, a vast majority of Americans (84 percent) use FinTech for
managing their finances. Currently there are approx. 1.7 billion people worldwide without
any bank accounts. FinTech comes as a saviour for all those people by providing an easy
option to participate and access the financial services without any need of a bank account.
FinTech is the best option to carry out financial inclusion since it’s developed to provide
consumers a direct access to their finances through simple yet cutting-edge technology. Since
the introduction of FinTech, the banking and finance sector has gone through some major
changes. Let us see how FinTech is adversely changing the Finance Industry.
Smart Chip Technology: Smart chip ATM cards have significantly helped in minimizing the
financial loss that occur in the case of mishaps. It comes with EMV technology that is
embedded in the chip. This technology uses a one-time password for each transaction. This
increases the security since the code is valid only for one transaction; so, even if somebody
steals it, he won’t be able to do anything. Bank officials generally advise their customers to
memorize their pin to avoid unnecessary hassles and troubles. Bankers are constantly looking
for ways to combat thefts and frauds by providing top-notch security to its customers. As
compared to smart chip, the magnetic stripe technology uses the same pin for all the
transactions, thus making it more susceptible to frauds.
Online Transactions : Monetary Control Act (MCA) was setup in 1980 with the primary
purpose of promoting an efficient payment system in the entire country by encouraging
competition between private sector payment service providers and the Federal Reserve. The
Automated Clearing House (ACH) assisted in efficient processing all the electronic interbank
payments taking place in the whole country. These electronic payments include insurance
premiums, social security, salary, dividend payments, bill payments, and direct debits of
mortgage.
Customer service chatbots: FinTech providers have also come up with customer service
chatbots that have really become popular in the recent past. Chatbots are nothing but bits of
software that use machine learning and natural language processing that enables them to
constantly learn from human interaction. Chatbots are highly efficient as they streamline
customer interactions like query handling and directing customers to the required
departments. Chatbots can also perform other functions such as that of Bank of America’s
chatbot Erica, which can provide investment advice to its customers. Chatbots have become
an integral part of all the banks since it not only reduces costs and enhances the customer
satisfaction but also allows agents in the call centres to focus on value addition.

Mobile Banking: The increase in the use of smartphones has forced banks to come up with
mobile applications that offers convenient FinTech banking services. Today, most of the
banks have a mobile application which has a user-friendly interface. Banks have also come
up with mobile apps that recognizes the fingerprints of the user. The application performs this
function without any biometric app or hardware. A mobile application provides quick access
to funds. With a mobile application, the user can perform several banking functions such as
quick bill pays, check deposit, account balance, statements, and many more.

E-Wallets: The immense growth of E-wallets is another indicator of the rise of FinTech
financial services. Samsung Pay, PayPal, Android Pay, and Apple Pay and are some of the
major e-wallet companies in the world. These wallets are used for a plethora of purposes
namely P2P payments, top-up & utility bills, international remittances, booking tickets, and
many more. There are also some standalone wallets such as Starbucks and Walmart Pay. E-
wallet have managed to attract users due to their tempting offerings which includes exciting
offers, lucrative cashbacks, and reward points, and many more.

We can conclude and justify the role of FinTech in banking and finance sector. The advent
of cutting-edge technologies coupled with customer’s demand for safe and more user-friendly
banking experience has led the banks and financial services to readily adopt FinTech finance
technology. Today FinTech is bigger than ever as it includes everything, some of which have
been mentioned above . In the coming years, it is all set to become ever bigger. Only time
will tell how big of an impact will FinTech have in the Banking and Finance Sector all over
the world.