This rising trend in demand for fintech services is putting traditional banks under a whole lot of pressure.
--BY LAXMAN RISAL
What is fintech and why is it getting popular by the day across the world? Fintech, short for financial technology, is probably one of the most spoken about topics in the banking and financial services realm. Words like “Crowd Funding”, “Peer to Peer Loans”, “Mobile Only Bank”, “Payment Bank” etc. have become buzzwords in the major financial markets all around the world. Fintech uses technology to assist financial operations and make life easier and more efficient for the service providers as well as customers. Most developing countries have a fast growing population of fintech startups, especially the UK, USA and China. But as popular as it is getting around the world, there are also serious critics who believe that fintech is destroying the values of traditional banking.
In today’s world efficiency is an important aspect in everyone’s lives. With the advancements in technology and birth of thousands of service providing apps like Amazon and Uber, services can now be provided to customers much faster and with less inconvenience. As a domino effect, in terms of financial services, people are increasingly opting for the ability to manage their finances on the go.
Fintech companies provide users with a myriad of services that some traditional banks are still struggling with. Some of these services include using peer to peer sharing of money with a click on the phone, opening a checking account without having to visit a branch, applying for loans through a video link, paying for many services through apps and many more. Customers are able to sit at their homes or on their office tables and manage all their finances, without having to take time out of their busy schedules to wait in line at banks. Thus, more and more customers are switching to fintech companies that allow them the freedom to use evolving technology to control their financial activities. This rising trend in demand for fintech services is putting traditional banks under a whole lot of pressure. To keep on par with their customers’ needs and to provide them with the most convenient financial services, most international banks have now started to invest large sums of money into fintech. A research done by one of the big four consulting firms shows that the global investment in fintech companies totaled a whopping USD 9.4bn in the second quarter of 2016.
In the local context, use of technology in banking is just evolving. Of late, Nepali banks have also have started taking digital banking seriously and there has been good advancement in the area of Internet Banking, Cell Phone based banking and branchless banking. However, there is a lot more to be done to promote digital banking, which is undoubtedly the future of banking, through policy interventions and nation-wide promotion. Nepali banks do not have much choice but to embrace technology and redesign their products and services so as to increase efficiency and reduce cost. Sticking to their traditional ways of selling products and services would not attract the technology savvy customers of today.
In the developed economies, almost all of the big banks have started to acquire or collaborate with fintech companies in order to deliver cutting edge services at a low cost for both the banks and the customers. If the traditional banks do not keep up with the advancements in technology brought by these fintech firms, they will lose customers as a result and cause more harm to themselves and fall short on providing the best services they can to their customers. We may see a similar trend in our country in the coming years.
Risal is the CEO of NIC Asia Bank Limited. Views expressed in this article are his own.