A Brief History of Fintechs

WHAT IS FINTECH?

FinTech is short for Financial Technology, which simply refers to startups that use the latest technology to improve banking and financial services and thereby enhance the customer experience.

WHY WE NEED THEM?

In the financial crisis of 2008, the Banking sector was collapsed. As a result of that, the trust towards banks had gone. But financial services are vital for economies. Thus, it can't be left blank. 

As people lost their trust towards banks, they had the desire to try the services of the Fintechs. This is when the rise of Fintechs began.

People got used to do transactions within seconds on their most-used apps and more importantly this became people's reality. Thus, the gap between banking apps and most-used apps get bigger. Some startups and tech companies seize the opportunity and attempt to benefit from that gap.

People begin to expect banking apps to give them the same experience as they have with their most-used apps.

WHAT IS SO GREAT ABOUT FINTECHS?

• Fintechs are smaller than banks which makes them have a larger movement area.

Traditional banks have to deal with bureaucracy which slows the process. Fintechs, on the other hand, are smaller firms and don't deal with tons of bureaucracy as banks do. In the end, they make faster moves and improve the products.

• Fintechs are new in the sector, so they're thirsty for creating new experience and features. 

The rise of Fintechs starts after the 2008 crisis. People start using them because they want to have a faster, simple and digital experience as they do their financial transactions. In order to meet people's expectations, Fintechs need to create new and better experiences than traditional banks.

• Fintechs provide digital services. Therefore, they need to digitalize and optimize current transactions

Traditional banks fail to meet the expectations of people in the world of Airbnb, Uber, Amazon. Since traditional banks need to deal with bureaucracy and use waterfall methods, their actions are behind small and agile fintechs. Fintechs provide digital banks that enable to open an account within minutes via digital onboarding. But in a traditional bank, you have to create some time in order to go to a branch and sign a ton of paperwork.

WHAT ARE THE FUTURE ATTEMPTS?

Financial services have been and always will be a vital part of economies and people's life. This is the reason why tech giants are into the financial industry and buy licenses related to finance.

Tech Giants, such as Microsoft, Apple, Facebook are really interested in finance and develop financial products. Facebook wants to issue a cryptocurrency Libra. Webchat was developed as a Chinese version of WhatsApp but ended up being a super app -one app for all. Webchat offers its customers to do everything within the app, even make payments! And now WeChat and Tencent granted a digital banking license. And there are also Uber Card, Apple Card, Amazon Card.

These companies are experts in providing personalized products and services for their customers. And they've been collecting data from their customers for years. People are used to receiving personalized services in their most-used apps, and now they want to have the same experience while doing their financial transactions. BigTech's personalized products and perfect customer experience created millions of loyal customers. Therefore, when they're into the financial industry, there are millions of people who are willing to be customers.

That is great for customers, but at the same time, it can be a threat to the economy. Experts are divided in this topic. I think time will show who's right.

CONCLUSION

If a Fintech wants to be successful, it needs to do the things listed above. Because traditional banks offer customers their experience and trust. So, in order to attract the customers, Fintechs need to create and offer a better customer journey through the transactions and ease the customer's life.

Otherwise, most of the customers hesitate the try something new. Recent research showed that most of the customers use their current bank account as a result of their habit -not because their bank offer differentiated services. In order to make customers move from their current banks to a new one, a Fintech needs to lure them with sophisticated features.

The value of a Fintech determined by the experience it's created. They need to point the pains of customers carefully and create new solutions for them.

Dec 2019

Emel

Fintechs or Banks?