Benefits of fintech in retail banking

Banking Industry CIO Insights | Wednesday, August 24, 2022

Retail banking encompasses all the banking services that customers receive from their bank, including their accounts, loans, and online banking.

FREMONT, Calif.: Changes and advancements in technology are paving the way for virtually everything in our lives to be accessible online these days. The development of financial technology (fintech) has led to the constant emergence of alternative solutions and business models, which can make traditional banking methods obsolete.

FinTech is radically changing the way some financial services are performed, enabling the delivery of current financial services and products in innovative ways. Many startups have sprung up, offering more specialized, cheaper and more convenient services than established banks.

It is now a trend that has caught up not only with these startups but also with the banks themselves, forcing them to adapt to this new upheaval in the banking industry in order to thrive.

Financial inclusion

FinTech has greatly expanded financial access. It has enabled ordinary people to access services once reserved for the privileged or those in a special economic situation. By way of illustration, consider the area of ​​investments. It is now easier and less expensive to provide investment advice to the general population. This indicates that what was once reserved for a specific group of individuals is now available to everyone.

Another illustration would be the loan. Previously, lenders had few data sources to analyze risk. This means that many people are refused loans or pay higher interest rates.

Fintech currently uses many sources of information to subscribe to consumers. As a result, it created more opportunities for the audience. Fintech has made it easier for people with poor credit to accept an installment loan online.

According to the World Bank, 31% of the world’s adult population does not have a bank account. These are people who do not have access to a bank account or credit institutions. Some of the reasons mentioned by these people were the inaccessibility of financial institutions, the high cost of opening an account and the absence of the required papers.

However, with the introduction of fintech, for the very first time in modern history, many people of varying economic status could gain access to essential financial services.

Provision of more affordable, efficient and convenient financial services

One of the benefits of fintech development is the provision of services that overcome some of the limitations of payment systems found by traditional banking institutions in the settlement of financial transactions.

People still need to go to banks to make payment transactions, which is a prime example of a geofence that imposes a constraint. People have started using fintech services such as digital and mobile wallets, mobile POS terminals, and peer-to-peer transfers as fintech advancements have finally overcome these limitations.

The advantage of using these services is that they are easily accessible through mobile phone applications that support certain digital versions of credit or debit cards. Plus, it’s easy to use because the consolidation of payment methods speeds up purchase processing time.

It offers digital or mobile wallet services, allowing customers to instantly transfer funds between two wallets on the site. Typically, the customer deposits money into their bank account connected to their digital or mobile wallet. With sufficient funds, the customer can transfer funds to another user. These transfers by fintech companies are cheaper, faster and more convenient than those made by conventional carriers.

It is cheaper because it has lower operating expenses and charges lower fees. It is faster than bank-to-bank transfers, in which customers are served at their physical branches and go through multiple security procedures before the money is transferred.

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