Why is fintech disrupting traditional banking?

  • Fintech companies utilise the latest technologies such as mobile apps, Artificial Intelligence (AI) and Big Data to provide instant services.
  • Fintech drives product innovation and market segmentation. It quickly adapts to market changes and develops customised products that meet the needs of specific customer segments.
  • Fintech can adapt more quickly to regulatory changes with the help of Reg Tech, increasing transparency and trust across the industry.

Fintech is an area that covers a wide range of technologies applied to financial services or operations. These technologies are disrupting the traditional banking industry on multiple levels by improving the accessibility, efficiency and cost-effectiveness of financial products and services in innovative ways.

Also read: How fintech is shaping the future of banking

Customer experience and service access

Fintech companies are changing customer expectations and behaviour patterns by providing a more convenient, personalised and seamless customer experience. Traditional banks are often clumsy and slow at customer service due to their time-honoured operational processes and systems.

Digital wallets and mobile payment apps have enabled consumers to make payments using only their smartphones, dramatically increasing the convenience of transactions. Many fintech innovations such as P2P (peer-to-peer) lending platforms and online asset management services have put traditional banks at risk of losing customers.

Also read: How fintech is changing financial services?

Cost structure and efficiency

Fintech have reduced the cost of traditional services through automation and digitisation of operations. Banking technology using AI and machine learning algorithms can automate numerous data analysis tasks, from risk assessment to customer service, areas that previously required significant human involvement.

Through automation, fintech can deliver services at a much lower cost, while also reducing the potential for human error. For example, robo-advisors offer low-cost investment management services that use algorithms to build and manage clients’ portfolios, often at a much lower cost than traditional banks’ financial advisory services.

Product innovation and market segmentation

Traditional banks have been slow to respond to product innovation due to their size and complex regulatory requirements. Fintech can flexibly use new technologies to quickly adapt to market changes and develop customised products that meet the needs of specific customer segments.

By using big data to analyse consumer behaviour, fintech can identify the needs of specific market segments, such as tailored financing solutions for small businesses or bespoke financial products for customers with specific investment needs.

Reg tech and compliance efficiency

With the help of regulatory technology (Reg Tech), fintech can deal with complex regulatory requirements more efficiently. These technology solutions automate compliance processes, reduce the need for manual labour, lower compliance costs, and increase the accuracy and speed of compliance.

Distributed ledgers utilising blockchain technology can provide a tamper-proof record of transactions, which is essential for meeting regulatory requirements such as anti-money laundering (AML) and customer identity verification. The use of this technology allows fintech companies to provide more efficient customer service while remaining compliant.


Yun Zhao

Yun Zhao is a junior writer at BTW Media. She graduates from the Zhejiang University of Financial and Economics and majors in English. Send tips to s.zhao@btw.media.

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