Financial Technology (“FinTech”), is a rapidly expanding industry which is utilising technology advancements to enable financial transactions to take place in a more efficient and customer centric manner. A number of areas have been established or significantly impacted by FinTech; Peer-to-Peer (P2P) lending, mobile payments, and instant payment notifications, to name a few.
As a result of technological advancements in other areas of their lives, customers are demanding the same from their banks. Customers want 24/7 access to their accounts, money and assets. The paradigm is shifting, with customers taking back power and demanding more. The ongoing bank branch closures across Ireland and the UK demonstrates the changing climate. With a reduction in branches, banks are investing heavily in technology to reduce costs, to improve their customer experience and to increase customer self-service in an attempt to ward off the threat of FinTech start-ups.
FinTechs, in contrast to banks, are free from the shackles of dated infrastructure and large corporate bureaucracy. There has been a boom of start-ups looking to benefit from liberal regulation within Ireland and the UK to deliver the service requirements of empowered customers. We now have the situation whereby customers can apply for a loan and have the money in their accounts within minutes of the application – even at weekends. It is not hard to see the threat this poses to the status quo.
A number of FinTechs within the UK have been granted temporary banking licences to gauge uptake. Given the inertia that exists within the customer account realm, customer uptake has been surprisingly swift and substantial. A number of full banking licences have now been granted, demonstrating the appeal for something different, whether that be a new product, a new service, or a new operating model. Customers want their finances brought into the modern era and they’re willing to trade ongoing loyalty for an experience that caters to their needs.
The blockchain is another example of FinTech and one which has been a hot topic across multiple industries for a number of years. From a financial services perspective, it is being touted to revolutionise the payments industry, by making it more secure and more efficient, and ultimately cheaper to do business.
We have only begun to scratch the surface on the implications of FinTech. This is an industry in growth mode with its footprint spreading across the entirety of the financial services sector and beyond. FinTechs are delivering options and competition to a sector that had become stale. Banks are in a unique position, they have the opportunity to capitalise on these advancements if they invest wisely. If they choose to ignore the threat, believing customers will do what they have always done, they are likely to be in for a rude awakening.