As innovation surges, does the conventional banking system still hold a place in today’s society? Fintech companies that provide digital solutions for the financial space and other forms of banking services present new ideas on how to approach the banking process. However, traditional banks are still relevant and strong helpers of the financial market as they guarantee stability and reliability while providing a wide range of services that cannot be provided solely by fintech.
This article looks at how banks and fintech have been changing over time, including how they are ushering in new opportunities and even revolutionizing the way that people manage their money.
The role of traditional banks
Conventional banks are the mainstay of the financial system as they provide critical services such as savings products, credit facilities, and investment products and tools. Through their expertise in offering a safe haven for money management affairs, they have been welcomed by both consumers and business entities in the market. This trust stems from the stability of banks as financial institutions that work with stringent regulatory policies and numerous best practices in place.
However, besides still having a large number of followers, traditional banks have numerous problems in the context of the modern world: they have to solve the issues connected with the introduction of new regulations, rapid advances in the sphere of technology, and constant changes in customers’ expectations.
Hence, the roles of banks are again under threat as they are reduced to being a part of the financial system rather than having the torchbearer status they once held as the sector undergoes a transition due to the entrance of new-age, technology-driven fintech firms.
The rise of fintech
Fintech can be defined as a relatively new model for the delivery of financial services that is based on digital technologies and services that are quite different from what a traditional bank might offer. Traditional banks are well-known to have certain procedures that they carry out physically to perform their operations, but fintechs offer their services mostly online, which is faster, more effective and more accessible to various people.
Mobile money solutions, crowdfunding and digital wallets have changed the way that money and its flow are managed in society – something that traditional and rigid banking cannot and will not alleviate. The goals of fintech are clearer when we consider its aim to facilitate processes, cut costs and provide users of global relevancy with tools that will allow them to manage finances effectively when targeting the general population successfully.
Thus, the use of fintech is growing, and the impact on the financial market is positive. It attempts to rebuild the niches left by traditional banks, presenting new opportunities for both actors and consumers.
The impact of fintech on traditional banking
Fintech has introduced a new chapter to the competition, where established banks are left with no option but to search for new ways of engaging the market. Current entrants, especially the fintech firms, are swiftly slashing the market from the traditional banking institutions as they are faster, cheaper and more accessible.
This has promoted competition, and although there have been conflicts between those industries and the more ‘traditional’ banking sector, the latter has beneficial effects derived from entering into collaboration with fintech companies for creating new services and clients. It has been found that, firstly, via the active implementation of fintech products, banking organizations can uphold ingenuity and competition.
These developments show that the fintech model has already started changing consumer behavior and the business environment of the global financial services industry, and it has great capability to disrupt the industry. This consistent struggle between competition and collaboration is shaping the future of finance, and the conventional banking players are not exempted.
The future of banking
It is postulated that the future of banking will be a blend of traditional banking and fintech innovation. Globally, trends such as blockchain, artificial intelligence and open banking will continue to define the direction of the financial services industry. Many of the traditional banks of the world are developing their strategies and are gradually becoming market leaders in assets and financial investments in fintech.
CNBC reported that Bank of New York Mellon is one of the leaders in this field and has been investing in many fintech startups, which shows how established companies can adapt to new trends.
When evaluating current trends in banking, it is important to consider how these changes will affect the banking industry and people’s lives. The challenge for banking in the future is to combine innovation with respect for clients’ needs. This calls for people to embrace the right attitude when it comes to making choices between banks and fintech by analyzing their viability in managing their financial lives.
