Fintech Companies – Are You Being Blinded by Your Investment Advice?
Financial technology is nothing but the latest innovation and technological innovation, which aim to counter conventional financial practices in the provision of financial instruments. It is also an emerging field that makes use of advanced technology to enhance financial activities in finance. Financial technology has come up as a result of intense study, research and development efforts. It is expected to bring a dramatic change in financial practices over a period of time. Financial technology can be defined as a branch or technique of modern financial instruments, which is inclusive of software applications, information technology and financial instruments.
Fintech have made significant contributions to financial markets. These include cutting the cost and increasing efficiency through speedy processing, elimination of paperwork and avoidance of conventional loan processing. They provide financial institutions with the necessary solutions to facilitate and increase liquidity. It also reduces transaction costs, minimizes loss of client assets and improves client satisfaction. The main benefits of fintech are: they simplify financial transactions, lower processing costs, increase access to market and provide clients more choice in financial products and services, while giving customers more control. In addition, financial institutions can derive various other benefits from fintech such as reducing customer liabilities, streamlining internal procedures and increasing profitability.
Since the advent of online financing, customers have been increasing their dependency on financial institutions. As a result of the high level of competition in financial markets, most financial institutions are finding it increasingly difficult to retain customers and attract new ones. Apart from simple customer convenience, fintech have other advantages like reducing operating costs, providing greater customer control, increasing cash flow, and providing faster cash processing. The above-mentioned features have resulted in the emergence of various financing solutions catering to the specific needs of individual consumers, business owners and larger financial institutions.
In recent years, the number of startups focusing on providing online financial services, especially in the consumer segment, has significantly increased. This has prompted traditional banks to re-examine their stand on fintech. A recent study by Forrester Research stated that traditional banking is losing its grip on customers’ mindshare as fintech startups are increasing at an alarming rate. According to another survey by financial news site CNBC, for every five people who used traditional banking in the last year, three of them used a fintech company.
To compete in the current scenario, traditional banks are adopting strategies to reduce their losses related to their business. They are doing so by streamlining or reducing the role played by banks in financing business. At present most financial institutions are focusing towards providing customized solutions through direct interactions with end users. This has given rise to innovative solutions such as mobile banking, internet banking and business credit cards. A lot of fintech companies also cater to specific industry segments, which makes them stand out from the traditional banks.
The traditional banks are gradually adapting to the challenges presented by fintech. However, this does not mean that they are completely eliminating investment advice. Investment advice is still a major part of their business. It is, however, given more priority than before. For instance, the corporate investment bank of a bank is now putting more focus on research and development because the sector is witnessing unprecedented growth.