5 benefits of technology in the financial industry
The ongoing tech boom revealed a significant effect on the role of financial institutions opening up new horizons for advanced and innovation-friendly companies such as fintech banks. These companies have leveraged financial technology to discover untapped markets and change the rules of the industry.
At first, banks saw the rise of fintech as a threat. However, nowadays, they have progressed from a competitive relationship to a collaborative one, where both banks and fintech complement each other and provide the skills that the contra part needs. As a result, banks provide fintech with expertise, while fintech provides banks with technology and the ability for innovation.
Top 5 benefits of financial technology for the banking industry
- Fintech technology allows banks to find new spaces for innovation within a more controlled framework. Considering that Fintechs are less bureaucratic, they have the capacity to endeavour on new projects, change and correct errors on the fly, without the need to make large investments or wait a long time for process approvals.
- Fintech technology also provides new business opportunities since it helps find new markets and offer products that are more suited to the needs of a company's customers. This is the case with alternative credit scoring, which permits precise credit profiling and up taps unexplored segments using technology based on metadata and artificial intelligence.
- Another benefit of financial technology is the possibility of obtaining information in real-time. Advanced machine learning mechanisms can better understand customer behaviour and offer an improved experience. In this way, institutions such as banks can improve the understanding of a client's needs and take more assertive loyalty decisions.
- How can financial institutions avoid fraud? Security is also a key result of financial technology innovation. Fraud is increasingly imperceptible and harmful, which is why a good system is required for protection. A security breach can result in terrible consequences, such as losing a large number of customers. Institutions must be at the forefront of their security systems to ensure their clients' financial health and trust.
- Lastly, financial technology helps reduce costs. For example, in the case of credit scores, all manual processes are avoided, and, therefore, any human error that could lead to economic losses is prevented. Likewise, it allows the payment collection system to be much faster and more efficient, without mistakes, avoiding misunderstandings with the customer.
In short, with the emergence of fintech, the demand for financial technology is increasing. As a result, fintech has become a key pillar for growth in such a changing industry.