With fintech on the rise and more consumers moving towards digital payments, traditional banks are struggling to keep up and offer customers the innovation they crave. Fintech is a booming industry that combines financial services and technology to help people and businesses manage payments and financing. According to Tipalti, 64% of consumers worldwide have used one or more fintech platforms, up from 33% in 2017. In this article, we’ll discuss the differences between fintech and traditional banks, and the growth potential of financial technology.
The Difference Between Fintech & Traditional Banks
While fintech and traditional banks both aim to provide seamless financial services to consumers, more consumers than ever before are opting for fintech over traditional banks as their demands shift to wanting things faster and easier. Fintech is bridging the gap between what traditional banks offer and what the modern consumer has grown to expect. The industry has experienced massive growth. In fact, according to Kenneth Research, the global fintech market value is expected to reach $306.7 billion by 2023.
Structure and Function
One of the ways fintech and traditional banks are different is how they operate. Fintechs are innovative and use new technology like artificial intelligence, big data, and cloud computing to give consumers a unique experience. These types of companies use streamlined complex financial processes that are easier to change using modern technologies. Traditional banks are restricted by their legacy systems which cause which means they can not implement new financial services in a timely manner.
Fintech’s are easily accessible online so consumers do not have to be present to access their financial services. Fintech’s offer 24/7 access, remote account opening, quick consultations, and better communication with customers overall. Most traditional banks require you to be present to use their financial services, or speak to someone over the phone, which is not what consumers want these days.
The pandemic is a big reason we have seen a digital transformation taking place over the past two years, which shows why Fintech has tremendous growth potential. But Traditional banks arent going away anytime soon. Banks have sustained market share and have started the move towards offering certain fintech features that meet their consumers’ needs.
Although fintech is considered new and therefore riskier, its benefits outweigh the risks. while traditional banks are bound by strict regulations, fintech companies introduce new features rapidly and consumers love it. Fintech offers a faster, less expensive, more innovative, and highly user-friendly experience.
As the whole financial system continues to evolve, allocating resources for digital agility has become a top priority for banks. Consumers want the ability to manage their finances from anywhere, anytime. To meet the demands of consumers, banks are embracing fintech features to improve the user experience. The ideal situation for banks and fintech is long-term partnerships that combine innovative technology and support and trust towards the future of payments.