The Finance sector has undergone drastic changes in its approach, policies, and method to provide better services to its clients. In the last two decades, technology has been utilized to unleash the full potential of the financial service sectors which has proven to provide much better yields and results. One of the most noteworthy changes is merging of Fintech with the banking industry which can turn out to be boon for the economic sector.
1. The Role of API
Application Programme Interface plays a significant role in binding multiple systems together. This assists in creating a single and efficient platform. They synchronize maps together and aid in carrying out payments and texting in a single flawless application. Therefore APIs immensely vital for internal proceedings of financial institutes and banks alike. Apart from these APIs also assist in external user-experience by generating frictionless, simple and faster process. They offer a highly productive and cost-effective service. When APIs are merged with Fintech services, they tend to disrupt traditional banking and replace them with open banking settings.
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2. Open Banking
Open banking is a unique and specialized process through which banks and financial institutions can share information and data with third parties such as companies and applications in a safe and secure manner. Open banking allows customers to easily share financial data with third parties, to compare and analyze data in order to select the best services, to manage account efficiently and to make the right financial decisions.
3. Software as a Service
Here Fintechs sell or license their technology to banks and financial institutes. This allows banks and financial institutes with ready-made infrastructure for in-house solutions and makes it easy to provide an array of innovative products and services under the name of their brand without having to create new customer base altogether.
On the other hand partnership with banks can allow Fintechs access to a trusted source of low-cost funding. Bank’s infrastructure can also take care of regulatory requirements and ensure seamless proceedings of the partnered Fintech.
4. Referrals
This is an interesting approach where institutions and banks refer customers and clients to the best suitable Fintechs in order to fill in the gaps in their own services. Referrals approach can assist billions of underserved and unbanked people throughout the globe to access better financial services and offerings.
Banks can have numerous benefits through Referral method. This approach improves customer experience by filling up gaps in banking services by outsourcing Fintech services that aid in retaining customers. Referral fees can generate an additional source of income for banks. While Fintechs platforms and startups can have a consistent flow of business through a loyal and trustworthy base of banking customers.
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5. Outright Purchases
This is a traditional approach where banks can directly buy FinTech’s rights to technology or purchase the company altogether. For banks, this course of action provides them with rights to technology which can be utilized to bring about the competitive edge, promote the expansion in new markets and acquire a new set of customers.
For Fintechs, merging with a well-established bank can result in the availability of additional funds which can be beneficial for product research and development. Hands-on expertise of banks about financial markets to can guide Fintechs in proper product launches. This approach provides a great option for the founders who are willing to exit from the market while ensuring the availability of quality products and services for existing customers.
Final Verdict
The traditional view that Fintech exists solely to disrupt banking and other financial institutions have become outdated. The collaboration of the banking sector with new Fintech companies definitely has more potential is more beneficial to both organizations for long-term growth. It also facilitates customer satisfaction by plugging the gaps in products and services of both the constitutions through collaborations. Banks provide extensive knowledge of the market and huge customer base while Fintechs give access to their developed financial technologies and rigid frameworks to the resultant merger. This makes developing innovative products and services, expanding in unexplored potential markets and delivering best suitable products to end user possible which in turn retains satisfie
