The new generation of financial technology companies is having a profound effect on the transaction services industry. From peer-to-peer lending to micro-finance, fintech is chipping away at critical aspects of the banking sector, disrupting it one service at a time.
The banking sector was initially apprehensive about ‘fintech’ or financial technology. They feared that these new startups would lure the banks’ customers with better and more user-friendly services. But the prospect of collaboration has eased their fear of disintermediation quite a bit.
Fintech, presently, offers an opportunity for traditional financial institutions to bring in new levels of efficiencies to specific aspects of their value chain. It allows an entity, such as the bank, to retain their focus on managing customer relationships and facilitating financial services, taking on the onus of innovation on themselves. Consequentially, the bank benefits from technology-induced efficiencies and quality improvements, while the upstart stands to gain validation, have its existence affirmed, and gain a ton of actionable insights along the way.
The Shape of Collaboration
One option is for the banks to invest directly in promising fintechs and encourage them to develop products that will supplement and enhance the banks’ existing services. Additionally, the banks can extend support infrastructure necessary for building innovative financial services solutions, such as settlement capability for trade finance services.
A partnership is also a desirable approach to collaboration, where banks and fintech companies come together to build products and solutions for their customers in tandem. This way of association is widely favored by banks, especially if the fintech partner is reliable, focuses on quality, integrity, and security of the products they create.
Of course, for these collaborations to be successful the customer – the third stakeholder – cannot be ignored. It is critical for banks to work closely with their customers and understand their needs to establish practical requirements for building new solutions into their existing workflows.
The Gains and the Lure
The principal bait for banks to work with young and agile fintech companies is that the association allows the ability to ideate and test solutions fast and in a cost-effective manner.
These solutions can be tailor-made to fit with the existing ways of the bank, targeted at addressing specific problem areas with precision.
On the face of it, fintech is a reality that cannot be ignored. But, for these disruptive technologies to go widespread and make a significant impact, industrial bodies and regulators need to play a substantial role. Especially in creating standards and rules that will ensure clarity and fairness in the market.
We are only just realizing the potential of fintech. It’s getting convenient and safe to onboard these technologies, and we are getting closer to reshaping the conventional ways of financial services for the modern consumer.
Blockchain, for instance, is promising to solve many of the problems created by time-consuming paper-based processes in trade finance by replacing them with fast, efficient, and transparent procedures. Take the case of cash management as well. Payments are bound to evolve as synchronization between payment and service provider improves. Today, payment is triggered by the receipt of an invoice but, in the future, the confirmed receipt of goods or services could serve as the trigger instead leading to more efficient business processes.
This is just the beginning of the exciting new future of financial services sector powered by advancements in technology and aimed at enabling an integrated financial services landscape.
We, at Airpay, are excited to be building on this possibility. We have created an integrated payments solution for enterprises to make and receive payments across channels including desktop, mobile, and offline. By enabling cash-less transactions across various touch points, we help businesses reduce the average time taken for payment reconciliation and collection. Which means transfers that used to take days can now be completed in real time, allowing money to move as fast as the business.
This is just how we are pushing the boundaries of what is possible. And we are confident that fintech, as a collective force, will bring about revolutionary changes in the ways of banking in the near future.