Combining Banking And Fintech To Work Better Together
The Financial Service industry undergoes a lot of change in its policy and approach as well to make the services even better. Recently, there has been a lot of use of technology in this sector that has been seen and everything proves to be for the better. One such notable change is combining FinTech with banking.
FinTech, an abbreviation of Financial Technology, is a service provided by specific companies that were initially viewed as a competitor in the banking sector. Over the years, it has proved to be a boon to them with both working better together.
According to the 2017 World Retail Banking Report it is seen that:
- In the future about 91% of banks and 75% of Fintechs are expected to partner with one another.
- It is also seen that API or Application Programming Interface is the key enabler that has brought in this evolution.
API was initially a term that was reserved for the technical experts only but over the years it has become the integral part of everyday language. This feature continues to change with more opportunities and capabilities for the Fintech companies as well as the banks and other financial institutions. This has resulted in their working together in order to provide better service to the customers.
The role of API
API plays an important role in this matter acting as a glue to connect multiple systems. This in turn creates a single but efficient platform. The API helps to synchronize the maps together and also helps in making the payments and texting in one seamless application. That means, APIs are extremely useful for banks and financial institutions internally.
However, there is much more to it. Just as the APIs are important for the internal application for the banks and other financial institutions it is also equally important, if not more, from the external standpoint.
Most financial institutions are dedicated and loyal to their customer and are always focused to create grander customer experience and the APIs help them to do exactly that in many different ways such as:
- It helps to generate frictionless and simple process
- It makes the process faster and
- It provides more productive and cost effective service.
One of the most important features of the partnership between APIs and Fintech is that it disrupts and changes the traditional banking setting with open banking.
About open banking
Open banking is a specialized process in which the banks and financial institutions are allowed to share data with any third party company or any application in a more secure manner. The APIs help in this thing in real time.
In the olden times banks were typically considered to be the custodian for the financial data of the customer and also as the facilitators for monetary exchanges. However, the fast and notable rise of the Fintech companies posed a threat to the banking industry.
Now the scenario has changed completely and several banks and financial institutions have started to embrace Fintech services for faster, better, more innovative and accurate decision making and improved service quality.
From the customers’ point of view, open banking gives them a lot of opportunities such as:
- It gives them the ability to share their own financial data easily with the third parties.
- It allows them to compare and analyze different data and choose the best services amongst them.
- It also helps them to manage their accounts in a better way and more effectively and
- Ultimately it helps them to make more sound financial decisions.
However, the fact that most bankers consider personal loans to be the most risky product that may move to a Fintech company, has also helped the customers, thanks to the open banking system. Borrowers can now decide whether they will take a debt from a bank or any other lender. It even helps them to decide whether they will take loan out to get rid of their previous loans or to visit sites like nationaldebtrelief.com or others to choose a grant or relief to deal with their present debts.
In short, with the use of open banking, customer experience can be enhanced and expedited in a great way.
Traditional banking downsides
Combine banking with FinTech services has enabled the traditional banking sector to minimize if not eliminate their downsides in providing the best services.
- Typically, traditional banks are infamous for their snails speed in their work. However, with the emergence of APIS and open banking, traditional banks just like any other private financial institution can now create a more cost effective and productive solution for their customers by vastly increasing their speed to market.
- Another significant aspect that has helped the traditional banks and other financial institutions due to embracing APIs and open banking is that they are now more equipped to build a partnership with the Fintech companies.
A few other significant benefits of such partnership between FinTech and banking sector are:
- The language of the open banking technology helps the banks to optimize third party integration
- It helps them to create greater accessibility to different features as well as partners
- They can now improve their services after comparing all available banking options as well as the available new product and offerings.
Therefore, the open banking system which is the result of the combination of the FinTech services and the banks has enhanced the services that the financial institutions now provide to their customers.
To sum up
It is due to the significant changes in the financial space in the past couple of decades that has brought in such useful new technologies that has also increased the level of competition in the marketplace.
Considering a survey by PwC, it is seen that about 63% of all bankers consider the rise and use of Fintech companies by the banks to be their opportunity to inflate their products and services. It is for this reason, more and more financial institutions are now embracing these changes in order to keep their customers satisfied. It has provided them with enticing capabilities as well.
The post is by Isabella Rossellini, a marketing and communication expert and she also serves as content developer with many years of experience. She has previously covered an extensive range of topics in her posts, including business and start-ups.