The Rise of Fintech and the End of Traditional Banking

The Rise of Fintech

Developments in financial technology, or fintech, are changing the way we make payments, with new products gradually transforming how personal and commercial transactions are processed. The pace of these developments has opened up a whole range of opportunities for fintech start-ups and new players; but the arrival of cutting-edge technology has also presented challenges to traditional banks and the retail sector, which have had to adjust their strategies accordingly. For customers, however, there are two key areas where we can see the impact of fintech – namely, security and the arrival of the “mobile wallet”. In this post, I want to take an in-depth look at these areas and weigh up the challenges and opportunities for retailers.

From the customer’s point of view, fintech has the potential to deliver increased security and improved flexibility. Indeed, the consumer and retail sector has led the early adoption of new payment methods, with digital growth encouraging and facilitating the move towards a “post cash” economy. According to a report published last year, mobile payments grew from an estimated $5bn in 2013 to as much as $16bn in 2015. As customer expectations change and consumers grow used to mobile payments, it is becoming more and more important for retailers to provide an optimized, secure and convenient payment system.

The smartphone is of course one of the main factors behind this innovation. Consumers can now easily make in-store payments and transfer money to friends using their phone. Last month’s launch of Apple Pay in China is a reminder of the scale of the opportunities – even if the company must first overcome resistance from big banks and retailers. This is important because the system requires a digitized version of a credit or debit card to be stored in the “mobile wallet”. At present, transactions are secured using “digital secure remote payment”, with authentication with Apple TouchID authorizing a transaction up to limited amount.

But Apple is just one entrant in a market that is moving rapidly and in different directions, and shifts in consumer expectations are as much an indicator as a driver of change. Pivotal here is the role being played by cloud-based technology, new security measures and the analysis of big data. Cloud- based solutions, for example, have allowed organizations to develop scalable and cost-effective services, with APIs allowing for more intelligent and efficient data management. Providers of online payment systems such as Stripe and PayPal have been working hard to expand and develop their services, as well as competing to get their products embedded into social media channels.

GPS Developments

This new technology has prompted some to voice concerns about privacy and information security. In response, traditional banks and start-ups have been investing large sums in the development of new security technology, with biometric security – fingerprints, facial recognition and even iris scanning – now widely available. This is combined with the development of increasingly sophisticated algorithms based on individuals’ spending history. One significant development is the possibility of using GPS to confirm an individual’s location: if an alert is raised by a potentially fraudulent payment, the bank can use the account holder’s smartphone to verify their location. Some customers, however, may still have doubts about the possible implications for privacy.

Big data is another area of real opportunity for banks and for start-ups looking to disrupt the market. Indeed, a bank’s capacity to leverage the possibilities opened up by big data is becoming an increasingly important factor in the competition for customers and clients. This is the reason why banks, and venture capitalists, have started to invest such huge sums in the analysis of financial data. Those banks that can effectively analyze and interpret the vast quantities of financial information will be better able to develop new, client-friendly products that today’s tech-savvy customers want and, perhaps more importantly, deliver a more reliable and cost-effective service. With person-to- person (P2P) mobile payments, for Instance, customers can now make payments directly into other accounts with their smartphone.

In light of these developments in fintech, traditional retailers and online businesses need to do several things. To begin with, we need to come up with strategies and payment solutions that account for changing customer expectations by delivering fast, secure and convenient payment across Multiple Devices. But, perhaps more importantly, we need to find ways of leveraging new technologies and payments infrastructure to remain competitive and ultimately deliver better products and services to our customers.

By George Foot

Ron Cadwell
Net Zero Emissions Designs Sustainability has become an increasingly frequent topic of discussion for data center operators, with many pledging to be carbon-free as soon as 2030. But are these commitments a response to the ...
Steve Prentice
The Need for Experts The explosion in AI technologies has brought with it clear concern that easy answers and intelligent copywriting are now the domain of machines. This has led to the question of whether ...
Ronald van Loon
In 2030, AI will likely contribute around $15.7 trillion to the global economy. Organizations that invest significantly in AI and leverage practices that accelerate and scale AI development have been shown to gain the highest ROI from AI ...
Alex Dean
Enabling Privacy and Personalization Most businesses today rely on data collected online to better understand their customers and deliver more personalized products, services and experiences. These insights can be transformative for an organization, especially when ...
Tiago Ramalho
More equitable future for food distribution with AI At best, only 70% of food gets used in the United States. The rest goes to waste. Although devastating, the good news is this massive waste of ...

Get Smarter

Whether you're just starting out in the online industry or looking to take your skills to the next level, Get Smarter eLearning platform is the perfect choice for you. Sign up today and start your journey towards online success!

Use code LEARN15 to enjoy 15% off all courses.