Over the past five years, Fintech is a phrase which has created a lot of buzz in the financial industry. One can define Fintech as a blanket term for disruptive technologies affecting the financial industry. BI Intelligence has published a report on the ways Fintech is leading unstoppable transformations in the financial services industry. As per the report, investments in Fintech by venture capitalists have skyrocketed over the past five years. The investments have grown ten folds in the last few years and creating a concern for a fintech bubble in some investors mind. The concern is just hype and the report highlights the reality.
Currently, Banks have a massive and inefficient infrastructure that is difficult to overcome. They are unable to meet the needs of the customer. Nowadays, the customer is looking for customised, personalised and easily accessible services. Fintech has grabbed the opportunity as it can disrupt any area of business from back office to front office. Fintech firms have provided improved customer experience and cost-effective operational structure.
BI Intelligence in the report has highlighted following 5 ways in which fintech is transforming financial services:
- Fintech start-ups targeting end customers – Online banks like Atom, Ally, Moven and many other have proved that branches are no longer essential. Banks are getting sidelined and hence they are innovating or partnering with fintech start-ups.
- Rise of Robo-advisors – Automated management of investments is on rise as it is customizable, personalized, removes brokers and has lower fees. Robo-advisors such as wealthfront are growing at a fast pace as compared to some of the other older players in the industry. Over the coming 5 years, in US robo-advisors assets under management are estimated to increase nearly 7 times.
- No Agents in Insurance – Fintech start-ups are offering insurance through mobile which eliminates the need of sales agents. As agents are costly, even venture capital firms have identified this trend and are backing the start-ups.
- POS technology going mobile – Merchants have gravitated towards the easy-to-use and scalable tools offered by firm such as Square.
- Streamlining process through Blockchain – More than 40 banks are testing the blockchain applications with R3 consortium. With the use of blockchain technology, banks can increase their annual savings.
Existing players in financial industry are aware of the threats due to rise of fintech start-ups. As per one of the PwC survey mentioned in the report, around one-third of incumbents are entering into partnerships with fintech firms and 9% are acquiring fintech firms.
Full Report can be downloaded by providing details here!