How FinTech is disrupting Banking Sector?

By CIOReviewIndia Team

How FinTech is disrupting banking sectorOld-school banks are often associated with high interest rates, long waiting periods, and narrow range products. Many of them aren’t the most innovative and quick to adjust to the market changes. That’s one of the reasons why FinTech innovation parted ways with the big banks and is so warmly embraced by startups, smaller financial institutions, and alternative lenders.

The fact that conventional banks weren’t agile enough in their shift to digital gave a unique opportunity for less bureaucratic competition to jump in and take part of their audience. And I am not just talking about peer-to-peer lenders and companies looking into in-house financing. Even the more conventional institutions joined this race. It’s possible only due to the fact that they don’t need to develop their digital services and products from scratch and can use ready-made automated solutions. For example, there’s even community banks software which fully automates the whole lending process for this kind of businesses. Whereas previously these operations were some of the more traditional ones. So there’s no doubt that FinTech is disrupting banking sector at full speed. But let’s look at the most important technical factors that contribute to it.

Machine learning and AI

Artificial intelligence and subsequently machine learning are probably the most well-known flagship technologies promoted as the ones revolutionizing the banking sphere. Which is partly true but it needs reiterating that at the moment they are applied to solve issues in very specific domains. For the banking sphere that would be fraud detection, risk evaluation, and loan decision. The company leading innovation with applying AI and machine learning in this sphere would be TurnKey Lender, as the platform solution that automates the whole lending process. The AI algorithms within the system learn to analyze specific clients of each particular business to make more of the right loan decisions faster.

Digital to replace brick-and-mortar

People don’t like queues, they don’t like to come to a bank branch far from home to sign some papers. Modern users expect their providers of financial services to be fully digital these days, to let them do business from the comfort of their home. Not only does going digital saves a ton of operational costs, in most cases, it drastically speeds up the speed of providing services, and improves the user experience clients end up having. Given of course that the financial business is powered by the right software.

Cloud solutions to replace on-premise

The cloud businesses use might not always directly apply to the users, but it still makes a huge difference for the operational efficiency of a financial business. Cloud technologies in banking software make solutions more agile and accessible. At the same time, they help mitigating risks connected to the use of outdated tech and ensure a faster and more streamlined delivery of services and products. All of the above makes the use of cloud more cost efficient since the data and systems aren’t stored locally.

Meaningful blockchain use in FinTech

Now that the Bitcoin hype cooled off, more businesses start to see other benefits of blockchain. Namely, it’s distributed nature and the smart contracts which can come to replace the old way to seal deals. Ihreritly, blockchain is the technology that brings back trust into financial services by means of storing source data on multiple machines. Now, it should be noted that this technology isn’t the perfect fit for any and all financial business by default. For some operations, good-old relational databases work just fine. But in the face of the peer-to-peer trend, distributed ledgers are to gain more and more traction.

Benefits FinTech brings for business

All the things I named above are just the top reasons why FinTech is gaining so much popularity and why companies that embrace FinTech are winning the battle for the clients these days. Even though big banks still bring certain credibility, with all the regulation efforts focused on financial companies, services, and products, alternative lenders will only continue to earn users’ trust. Because in addition to reliability, many of the modern financial businesses see the following advantages from using modern FinTech:

  • Reduced human error
  • Reduced operational costs
  • Faster services
  • More agility
  • Easy deployment and maintenance
  • Easier regulatory compliance
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