The world of finance and banking has undergone a rapid transformation in the past decade.
With the advent of technology, traditional banking has changed its course and has become more streamlined and convenient for customers.
At the same time, fintech companies have also gained traction and are making their mark in the financial industry.
In this blog, we will delve into the impact of technology on traditional banking and the rise of fintech companies.
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But first, let's start with some differences between traditional banking and fintech companies.
| Traditional Banking | Fintech |
Approach to business | Are large institutions that have been in business for many years. They have a more traditional approach to banking, focusing on established products and services such as loans, savings accounts, and checking accounts. | Fintech companies are relatively new to the financial industry and are more focused on innovation and providing customer-centric solutions. |
Use of technology | They have embraced technology in recent years and have started offering digital banking services. However, their use of technology is often limited to automating traditional banking processes and providing digital access to their products and services. | Fintech companies, on the other hand, are built around technology and use it to provide innovative solutions to customers. |
Customer focus | Banks focus on maximizing profits and may not prioritize customer needs as highly as fintech companies do. | Fintech companies are known for their customer-centric approach, using technology to understand and meet the needs of their customers. |
Speed and convenience | Traditional banks may take longer to process transactions and may have more rigid requirements for account opening and loan applications. | Often have faster and more convenient processes than traditional banks. For example, they may offer instant loans or allow customers to open an account in minutes using just their smartphone. |
Fees and charges | Traditional banks often charge higher fees and interest rates than fintech companies | Fintech are able to keep their costs low by using technology and having a more streamlined business model. |
The Impact of Technology on Traditional Banking
Traditional banks have been around for centuries, and the way they operate has remained relatively unchanged for a long time.
However, with the introduction of technology, the banking industry has changed significantly.
Technology has made banking more accessible and convenient for customers, who can now perform their banking transactions from the comfort of their homes.
Customers can now access their accounts, transfer money, pay bills, and manage their finances online.
This has resulted in a significant reduction in the time and effort required to perform these transactions.
Another impact of technology on traditional banking is the increased level of security.
Banks have implemented advanced security measures such as biometric authentication, encryption, and two-factor authentication to ensure the safety of their customers' funds and personal information.
This has increased the level of trust customers have in online banking, making it more popular than ever before.
The banking sector has implemented various technology and software development solutions to modernize its operations and better serve its customers. Some of the key technologies include:
1. Mobile banking: Many banks have developed mobile banking apps that allow customers to perform banking transactions from their smartphones. These apps often provide features such as account access, money transfers, bill payments, and loan applications.
2. Artificial intelligence and machine learning: Banks are using artificial intelligence and machine learning to improve their customer service, fraud detection, and risk management. For example, AI can be used to personalize the customer experience and provide relevant financial advice.
3. Blockchain: Blockchain technology is being used by banks to improve the speed and security of financial transactions. It can also be used to increase transparency and reduce the need for intermediaries in transactions.
4. Cloud computing: Banks are increasingly adopting cloud computing to store and manage their data, as well as to provide customers with faster and more reliable services.
5. Robotic process automation: Banks are using robotic process automation to automate repetitive and manual tasks, such as data entry and account reconciliation. This improves efficiency and reduces the risk of errors.
6. Biometric authentication: Banks are using biometric authentication methods such as fingerprint recognition and facial recognition to improve the security of their systems and better protect their customers' personal and financial information.
Software development is an essential key in the implementation of these technologies; for instance, let’s zoom in on the frameworks that are used for developing mobile applications for the banking sector. In CodeBranch, we are experts in mobile app development and InfoSec; if you need a development, don’t hesitate to reach us.
React Native: React Native is a popular framework for developing cross-platform mobile applications. It allows developers to write code once and run it on both iOS and Android platforms, making it a cost-effective solution for banks looking to reach a wide audience.
Flutter: Flutter is a newer framework for mobile development that has gained popularity in recent years. It is known for its fast development cycle and flexible UI, making it a good choice for banks looking to build engaging and visually appealing mobile applications.
Native iOS and Android: Banks can also develop native mobile applications for iOS and Android platforms using the corresponding programming languages (Swift for iOS and Java for Android). This option provides the highest performance and best user experience, but it also requires a separate team of developers for each platform.
Xamarin: Xamarin is another cross-platform development framework that allows developers to write code in C# and run it on both iOS and Android platforms. It is known for its fast performance and easy integration with existing .NET libraries.
If you are interested in mobile app development, you can read our blog, Four Approaches to mobile apps development. And watch our Vlog.
The Rise of Fintech Companies
Fintech companies have emerged as a result of the technological revolution in the financial industry.
These companies use technology to provide financial services that are faster, more convenient, and less expensive than traditional banks.
They offer services such as digital payments, digital wallets, money transfers, and investment management.
One of the key advantages of fintech companies is their ability to provide innovative solutions that traditional banks cannot match.
For example, fintech companies can use big data and artificial intelligence to provide personalized financial services to their customers.
They can also use blockchain technology to make transactions faster, more secure, and more transparent.
Fintech companies have also gained popularity due to their customer-centric approach. They understand the needs and wants of their customers and use technology to provide solutions that meet those needs.
This approach has resulted in increased customer satisfaction and loyalty, making fintech companies a serious competitor to traditional banks.
Conclusion
In conclusion, technology has had a profound impact on traditional banking and has resulted in the rise of fintech companies. Technology has made banking more accessible, convenient, and secure for customers, and fintech companies have taken advantage of this to offer innovative solutions that traditional banks cannot match. As technology continues to evolve, it is expected that traditional banks and fintech companies will continue to compete for customers, leading to further advancements in the financial industry.
You may be interested in reading this blog: Open Banking and API based-financial services.