How Fintech is Disrupting Traditional Banking
Fintech vs. Traditional Banking
Financial technology, widely known as fintech, is quickly reshaping how consumers interact with banks and financial institutions.
Thanks to the impressive strides in financial technology, banking is now more seamless than ever for customers. A simple mobile app can allow consumers to open checking and savings accounts, apply for credit cards, apply for loans and mortgages, and check bank statements. Unlike a traditional banking experience where everything must be done in person, fintech lets consumers complete most of their banking online or from their smartphone.
As fintech grows, it continues to disrupt traditional banking in a way that is beneficial for individual customers and the companies that serve them. While they may have been resistant at first, many legacy banking institutions are realizing that they need to implement fintech systems into their service offerings if they want to remain competitive and retain their customers.
Types of Banking: Consumer & Corporate Banking
To understand precisely how fintech is shaking up the financial world, we first need to examine the different types of banking. Banking can generally be broken down into two classifications: consumer and corporate.
Consumer (or retail) banking is the one most people are familiar with. This type of banking provides services to individuals through checking and savings accounts, CDs, mortgages, auto financing, and credit cards. These financial institutions meet most of the money-related needs of a large percentage of the population.
Corporate banking (or business banking) provides services to businesses ranging from local mom-and-pop shops to companies with millions in annual revenue. Corporate banking provides loans, cash management services, equipment lending, and commercial real estate services to various business entities.
How Fintech is Changing Consumer Banking
Fintech is filling service gaps in the traditional offerings of legacy banks. Although it offers less human interaction, well-designed fintech creates a more customer-centric banking experience by making services more accessible and easier to use. Consumers with bad or no credit can now open accounts completely online and regain their footing on the way to financial wellness. Mobile apps allow banking customers to make deposits, apply for loans, make transfers and check bank statements without ever leaving the comfort of their homes.
Because of technological advances, consumers now also expect more from their banking experience. Banks must keep up with the customer demand for excellent, on-demand services. This realization has led many traditional banks to partner with third-party fintech companies to enhance their offerings and stay competitive in the rapidly changing world of consumer banking.
How Fintech is Changing Corporate Banking
The ease of fintech isn’t just a welcome innovation for individual consumers – businesses have also benefited from the convenience that fintech brings to corporate banking. Companies with an exclusively digital business model find it convenient to use fintech for direct deposits, account monitoring, and sales and revenue tracking. Like consumer banks, corporate banks have been forced to adapt to the on-demand disruptions caused by new technology. While some may adapt faster than others, it’s clear that corporate banks that want to keep their clients will need to find new ways to leverage the power of fintech for their operations.
It’s no secret that fintech is forcing traditional banks to make strategic changes that benefit both consumers and businesses in their banking experiences. As fintech continues to disrupt the space and make customer acquisition and retention more competitive, traditional banks will be forced to create better services and more intuitive interfaces designed to make the user experience more seamless and engaging. And for anyone who’s ever waited in a long line at the bank or rushed across town to deposit a paycheck before the bank closes, these changes can’t happen fast enough!