Although banks used to be necessary for society to survive, now they have become outdated. Buried in excessive regulation and red tape, the big banks have difficulties in providing fast, efficient customer service. The cutting edge alternative to these outmoded institutions is called financial technology… or fintech.
Fintech is an industry based around using new and innovative technology and programming in order to compete with the large “mainstream” institutions. It isn’t one company trying to find it’s place in the market, it’s an entirely new market. One that seeks to render the big banks obsolete.
In other words, fintech is any innovation brought into the world of finance, banking, and loans. Bitcoin and Blockchain are forms of fintech. Automated risk management systems and insurance are another fintech innovation. And the proliferation of online lenders (for title, payday, and installment loans) is one of the major signs that more people are doing away with traditional banking.
Why Fintech is Replacing Banks
Computers and smartphones have forced a great deal of change upon the financial world in a relatively short period of time. Long-standing businesses, especially banks, are set in their ways and slow to adapt. While the banks and credit unions take their time deciding how to improve customer relations, fintech companies are moving in on their customers.
In our day and age, everything is available in the palm of our hand. Why should banking be any different?
Fintech evolves rapidly, meeting every need of their customer base. Meanwhile, banks are still open from 8 to 5, Monday through Friday. Banks require waiting in line, sitting in waiting rooms, dealing with customer service reps that read to you off a screen. Fintech can give you what you want, whenever you want it, wherever you happen to be.
Brick-and-mortar banking businesses don’t stand much of a chance.
Payday lenders revolutionized the online lending industry. Now fintech companies are evolving the model for online lending. There are multiple types of borrowing now, including B2B (business to business) and P2P (peer to peer) as well as the traditional B2C (business to consumer).
But it isn’t just competition that is helping the marketplace. The innovations of fintech are also helping to bring down loan rates, lower defaults, and lessen the wait time. Not only are there more options online than ever before, they are faster and more responsive than any bank has ever been.
What’s Next for Fintech
We have only scratched the surface for what financial technology can do. In just a few years, banks will be almost entirely online. “Going to the bank” will be as strange a concept to youngsters as a rotary telephone.
Even now, a fintech company has developed a new AI (artificial intelligence) program that scrapes all available data on each applicant, and can instantly approve them for a loan. It doesn’t just use banking records, it tracks each purchase you make and every social media picture you post.
The AI processes information much faster than any human ever could. It saves time and money and allows more loans to be processed. This in turn lowers the interest rates and makes the loans more appealing.
And this is only the beginning