Fintech vs. traditional banking: What's the difference?

An Overview

When financial companies make the most of today’s current and evolving technology, it is said to be a fintech organization. Fintech is a name derived from finance and technology and caught the eye of many businesses across the globe. The following post focuses on what is fintech, how it is beneficial in the long run, and of course, how fintech is way better than conventional banking.

Define Fintech

As mentioned above, fintech derives from finance and technology. The concept is highly recommended for seamlessly managing large funds and amounts in a short period. Now you will come across a wide range of fintech-based services that assure a quicker, easier, highly secured way to wrangle your finances.

With the advent of new and amazing technologies, enterprises are trending towards such rare and alluring collaboration. I hope that with increased usage of technology, organizations can make traditional banking systems a more enjoyable experience for everyone. Now many of you have this misconception that traditional banks will be forgotten and replaced completely by these technological advancements.

Gartner*, a global research and advisory firm, has said that banking as a service (BaaS) will hit mainstream adoption within the next year or two, as banking is transformed by digital technology.*

In simple words, if traditional banks keep on maintaining the long-lost 20th-century business and operating models, there is a fair chance they might face huge failures. So the only choice we have is to adapt and incorporate new and leading technologies. Not to mention fintech highly concentrates on how to keep up with the world, via emerging technological innovations. Some of the most amazing aspects that have led to new developments in banking include retail banking, investment management, fundraising, flexible payment options, cryptocurrency, Peer-to-peer money transfer, and a lot more.

So now here comes the big question, do companies successfully stand out in comparison to traditional banks? Well, here down below I would like to mention some of the top benefits offered by fintech.

Benefits of Fintech

#1 Money

The first and foremost advantage to consider is money. And it may quite interest you to know that fintech has the potential to create huge amounts of money. Now what happens here, the price of trading is decreased with capital, and fintech development ensures people from all across the globe join the social economy and take advantage of easy credit, and proper contractual terms.

Not to mention, commercial technology seamlessly intervenes in every aspect of life and business. So here you are bound to receive better-running living resources.

#2 Convenience

Another crucial advantage to consider is that fintech services can be easily accessed online or via mobile applications. So in other words, one can access their finance or banking apps at any point in time and from anywhere. Gone are the times when people had to visit banks for trivial matters. Today, people tend to choose convenience over any other aspect.

#3 Enhanced Financial Management

The next advantage offered by Fintech is enhanced financial management. You see here you are bound to receive a wide range of automated tools and technologies that enable easy management of your finances and investments. Also, most of the fintech companies are found investing hefty amounts in taking advanced security measures such as biometric authentication and encryption ensuring the user information is protected every single time.

Exploring the Fintech Landscape

Here we will learn about some of the most active areas of fintech innovation.

Cryptocurrency

Have you come across terms such as Bitcoin, and Ethereum, digital tokens such as non-fungible tokens, or NFTs as well as digital cash? Now these tend to rely highly on blockchain technology where it is easy to maintain all the records systematically. Now the most amazing benefit of cryptocurrency is that it doesn’t require banks to verify transactions. The peer-to-peer system enables easy sending and receiving of the payments. Here all transactions are recorded in a public ledger and successfully stored in digital wallets. Bitcoin, Ethereum, Litecoin, and Ripple are popular examples of Cryptocurrency.

Open Banking

Another term that must be considered is open banking. As the name implies, this banking practice offers third-party services with seamless open access to consumer banking, transactions, and other financial data from banks and non-bank financial institutions. All this is done via APIs (Application Programming Interface)

Easy access and control of consumer banking and accounts
Reshaping the competitive landscape
Promising gains and reducing risks

It may quite interest you to know that the overall open banking payment transaction values are supposed to exceed US$330 billion globally by 2027. Some of the top examples of open banking services include:

Payment initiation services
Account Aggregation
Automated Budgeting
Instant loans
Automated invoice reconciliation
Multi-banking platforms
Personalized services
Real-time fraud detection

From individual customers to financial institutions, fintech companies, small and medium-sized businesses, eCommerce companies, accounting platforms, software developers and so more can consider open banking services.

Insurtech

This is for those who tend to make the most of technology to simplify as well as streamline the insurance industry.

Robo-advisors

Now as the name implies, Robo-advisors are digital platforms which ensure easy augmented, automated, algorithm-driven financial planning and investment services. And do you know what is the best part here, there is no extra supervision required. Generally, Robo-advisors tend to ask relevant questions regarding your financial situation and future goals. This is done via a generic online survey. Then it offers proper advice and assists in where to make the necessary investments. Robo-advisors tend to offer:

Easy account setup
Robust goal planning
Appropriate accounting services
Portfolio management
Robust Security features
Comprehensive education
Low fees

Robo-advisors are mainly suitable for retail investments, estate planning and complex issues. Here keeping tabs on investment is extremely easy.

Cybersecurity

Another concept that must be considered is cybersecurity. Often considered financial cybersecurity which incorporates quick and precise protection of client's information and data from cyber threats. From banks to credit unions, insurance companies, and investment firms, every such institution is now a prime target for cybercriminals.

Benefits of Cybersecurity in the Financial industry

Protecting sensitive data
Preventing financial losses
Maintaining consumer trust
Maintaining integrity
Regulatory compliance
Operational efficiency
Future-proof against emerging threats

AI chatbots

AI chatbots are computerised programs which are supposed to have human-like customer interactions. NLP, machine learning, semantic search and so more are the master-minds behind the success of this technology in the fintech landscape. No wonder businesses irrespective of their size and industry verticals are going gaga over AI chatbots due to several advantages they offer such as automated customer support, boosting productivity, reducing support costs, gathering relevant insights and a lot more. So other than just stimulating human conversations, AI chatbots can offer a lot more.

In addition, I have come across many of you who have this misconception that AI chatbots will sooner or later replace humans. Well, it’s not but it will act as a co-pilot. The tech will be the ally and partner in offering exceptional support experiences like never before. Above all, AI chatbots have the potential to generate significant returns on investment (ROI) over time.