The Rise of Fintech: How Digitalisation is Disrupting Traditional Finance?

Fintech has been hailed as a game-changer for the financial industry, transforming the sector at a breakneck pace and disruptive force. The industry has changed in ways that were once unimaginable, shaking up the operations and challenging the traditional finance sector. Digitalisation is driving unprecedented levels of innovation and disruption to stay competitive while also meeting the evolving needs of its customers. The financial sector was among the first to experience its advantages when fintech app development emerged in 2008. This seismic shift caused 88% of traditional banking companies to fear losing revenue to these new fintech players. 

The quest for digital transformation and innovation is ubiquitous. Factors like 

• Increasing regulatory complexity
• Changing customer expectations
• Fierce competition
• Need for streamlined operations 

have created a compelling case for reinvention and innovation. Open banking has ushered in a new era, allowing systems to integrate seamlessly with new platforms and applications while replacing physical banks and paper-based systems with advanced digital ecosystems.

The urgency for digital innovation in banking and finance is evident from these projections. The sector has already experienced a notable transformation due to digitalisation, presenting an opportunity for proactive improvements. To reap the benefits, it is advisable to leverage the agility and potential of technology sooner rather than later.

All types of organisations, whether century-old banks or new FinTech startups are affected by this transformation. While some companies are digital natives, most require a significant amount of planning and foresight to embark on this journey. They must let go of outdated practices, update their cultural norms, upskill their employees, and adjust their mindset to become digital businesses. 

The journey for this transition has to start today or risk being surpassed by competitors and losing their relevance in the industry. Whether you're a financial professional looking to stay up-to-date on the latest trends in the industry, or a curious reader interested in learning more about digital transformation, this blog is the perfect place to start. So, let's dive in and discuss various aspects of digital transformation in finance services.

Forecasts on the Developments in the Fintech Space

In a recently conducted industry-wide study to make forecasts about the financial industry's future they came up with these projections for the sector by 2025:

• The adoption of automation and blockchain in financial operations will lead to a growth in intangible transaction methods.

• Real-time financial services will be provided. There won't be any recurring reporting to guide actions and choices.

• The banking sector will increase its efforts for customer service and business insights as a result of automated processes.

• Self-service will be the standard of the future.

• The new service delivery paradigm and the varied financial staff will both rely heavily on algorithms and robots.

• Due to the advent of financial microservices and apps, traditional ERP will no longer be useful. 

• Data uniformity will occur as a result of the expansion of APIs.

• The finance workforce will experience a cultural and organisational transformation.

Why Embracing Digital Transformation is Crucial for Fintech?   

To stay ahead in the finance industry and meet the evolving demands of consumers, it is crucial for finance firms to implement digital initiatives that keep up with the pace of today's innovation. According to a recent Deloitte study, 37% of financial companies surveyed have taken a cautious approach to digital transformation, while 38% have been more progressive in their efforts, and 25% have even surpassed their competitors. Let's find out about more impacts of digital transformation in the fintech industry:

• Establishing strong customer relationships

The banking industry is highly competitive, and positive customer experience is crucial to attract, retain and grow customers. To provide an excellent customer experience, your business team should have a clear understanding of their roles and responsibilities. Implementing modern tools and processes in your organisation can prepare your team to deliver your brand promise and consistently provide a positive and seamless digital experience throughout the customer journey.

• No-hassle Processes and Operations 

Implementing digital transformation services can assist in optimising and simplifying your business operations. This leads to saving costs, and time and empowers your staff to be more efficient and productive. By replacing outdated systems with a modern workflow process that automates compliance team involvement and has streamlined their marketing production. As a result, they have seen a significant reduction in time and a complete elimination of human errors.

• Adaptivity and versatility 

The banking industry is familiar with mergers and acquisitions due to technological advancements and financial services transformation. Cloud-based ERP systems are increasingly being used because they are user-friendly and easy to incorporate, making it more likely for financial institutions and banks to merge and consolidate. Personalised on-premise systems are no longer needed.

• Enhanced brand image

Maintaining a positive brand reputation is crucial for boosting sales and revenue in the banking industry. To achieve this transition, small businesses and others need to implement a digital transformation, including brand management software, to manage industry and consumer challenges and enhance brand growth across all significant touchpoints. Financial firms already use brand management software to manage their brand's details effectively.

• Integration of applications, data, and workflows

The traditional core banking systems consist of different tools that are put together without a centralised data-sharing capability, which can create issues. However, digital transformation in the banking sector has enabled companies to overcome this problem. As a result, there are several benefits, such as reducing the size and complexity of the tech stack, which is cost-effective, improving data accuracy, standardising data across multiple locations, and eliminating time-consuming ETL processes.

• Generating consistent and comprehensive reports

Real-time data has become a crucial element for the banking industry as it allows for accurate and error-free reporting. This, combined with the easy consolidation of data, has revolutionised the industry. By having access to real-time data, banks can identify issues and adapt to changing trends quickly. This means that banking staff can now focus on more analysis-based responsibilities instead of being bogged down by paperwork. With less time spent on compiling reports, there is more time for planning and strategizing.

• Uphold compliance requirements

Implementing digital transformation in finance and banking can help you maintain compliance effortlessly. Modern financial management systems come with advanced features such as automation of accounting tasks and auditing processes that reduce the time and effort required for these activities. Standardising data and pushing it into a centralised system from other applications also helps minimise the chances of human errors. Furthermore, you can receive regular compliance updates through cloud-based payroll systems, eliminating concerns regarding changing policies and regulations.

Emerging Digital Trends in Fintech 

The financial technology industry is rapidly advancing and has the potential to disrupt various sectors within finance. There has been a remarkable growth of fintech companies in recent years, and organisations are actively exploring ways to incorporate these technologies into their ecosystems. From my perspective, the fintech industry is currently booming, with traditional financial institutions increasing their investments in fintech and competing with startups to offer financial services faster and more efficiently. Here are some of the anticipated fintech trends that will impact fintech solutions company and their functioning in 2023:

• Revolutionising banking through Mobile Payments and Digital Banking Services 

Mobile digital banking has improved the customer experience by providing faster and more efficient services. Neobanks are disrupting the fintech industry by introducing online banking operations with mobile-first design principles. Customers can easily open accounts using their smartphones without physically visiting a branch or filling out extensive paperwork. These apps are user-friendly and offer various banking features, such as savings accounts, loans, easy payments and remittances. Digital banking has evolved beyond going paperless and cashless; it has contributed to shifting from a centralised traditional banking model to a more distributed, technology-driven one.

• Changing the Financial Landscape with Blockchain Technology

The innovation of blockchain technology is regarded as the most significant advancement in digital transactions due to its decentralised management. This means that it cannot be controlled by any single entity such as a company, government, or bank. While security concerns surrounding this FinTech are a concern for many organisations the increasing adoption of blockchain as a secure digital ledger cannot be overlooked. Blockchain has the potential to revolutionise the financial sector in many ways, such as with decentralised finance (DeFi) and non-fungible tokens (NFTs).

• White Label FinTech is the future of customisable financial solutions

To put it simply, white-label products are created by a manufacturer for the purpose of being rebranded and sold by another business. The field of financial management can be quite intricate, but with white-label fintech solutions, companies of any size can easily create a global payment gateway. This is a mutually beneficial arrangement, as it allows the distributor to expand their customer base while also reducing the initial launch costs for the reseller. With large tech companies expanding their financial services offerings, there is now a significant opportunity for both fintech startups and established players to utilise private labelling to compete and generate new revenue streams in banking and personal finance tools.

• Unlocking Financial Innovation with Open Banking

In the realm of banking, open banking is a concept that enables financial institutions to link third-party APIs with their own banking systems. This allows customers to provide their financial data to third-party providers in exchange for new or enhanced services. For instance, a customer can grant permission for a utility company app to access their bank account, making it easier to pay bills without creating an additional account or payment method. Open banking has several other use cases, including personal finance management, account aggregation, instant credit risk assessment, subscription management, and opening new accounts. The definition of open banking is determined by a financial institution's digital strategy, data accessibility, and functionality that it offers.

• Voice-Activated Payment Solutions is the next big thing in FinTech

Using voice-activated technology, individuals can utilise their phone's voice recognition feature and digital assistants to access their account balance and make payments or money transfers. This technology can also be used for contactless payments in physical retail stores, especially in cases where contactless payment terminals are unavailable. Additionally, it can help individuals with visual impairments to participate in the cashless economy. Venmo and PayPal are among the transfer service providers that support voice-enabled payments.

How Fintech is Leading the Way in the Traditional Finance Sector?

• Financial service executives recognise the importance of customer experience in digital transformation, and going digital allows banks and FIs to track and engage customers with personalised products and services. 
• Deploying digital tools can streamline operational processes, save time and costs, and boost profits. 
• With easy data accessibility and management, raw customer data can be analysed to optimise business intelligence and growth. 
• Automation improves process agility and productivity, eliminating human-induced errors and improving precision. 
• AI-based analyses enable faster trade decisions and customer-centric product or service strategies. 
• CFOs should partner with business transformation experts to digitally empower the finance function proactively, shifting paradigms in finance and accounting.

How can Global Lancer's help in leading the way?

The widespread influence of digitalisation in the banking and financial services sector has made it possible to introduce preemptive modifications that can benefit the industry as a whole. In order to maximise your company's revenues, it is crucial to utilise the adaptability and potential of technology as soon as possible. So, in order for businesses to remain competitive and satisfy their stakeholders' expectations, digitisation must be given high importance.

When putting digital transformation ideas into practice, it is crucial to give accessibility, expansion, and privacy a top priority. Regardless of the Fintech business model you are pursuing, Global Lancers can help with developing cutting-edge Fintech solutions. We are a fintech solutions company with a team of skilled professionals with a deep understanding of Fintech trends, innovations, and developing business models. By working with us, you can be sure the experts you are engaging with have a thorough awareness of the standards and limitations that apply to Fintech development.
Let's discuss your Fintech prospects!