What's the impact of fintech on banking industry?
March 3, 2024
9 min read

Are you aware of the fact that India’s overall fintech market opportunity is estimated to be $1.3 Tn by 2025, growing at a CAGR of 31% during 2021-2025?

This one statement paved the way for the FinTech revolution in India and is still growing…

In just a few years, the emergence of fintech-powered technologies has revolutionized the financial sector, affecting how both large and small firms deal with their finances and transactions.

Smaller businesses, in particular, have benefited from this trend, which has made flexible financing alternatives and finance automation more accessible. As a consequence, giving people more financial flexibility.

Moreover, FinTech start-ups have been proclaimed ‘disruptors’ by numerous traditional institutions due to the massive change they brought in the field of financial services.

Is financial technology, however, actually disruptive?

Just like Google, Amazon, and Facebook, fintech companies and those utilizing fintech concepts are popping wheelies the digital wave to provide customers with a similar online experience. Sectors of the financial ecosystem like banking, payments, lending, investments, and insurance are developing with our societal tech change, with fintech setting the pace.

The Fintech industry in India is innovating to enhance access to finance. Now it is time to convert these fintech initiatives into a fintech revolution. A revolution that helps to achieve financial empowerment of every single citizen of the country.

What is fintech in banking?

FinTech, as it is commonly known, is one of the most intriguing and rapidly expanding fields in today’s digital realm. The description may seem straightforward, but the products and businesses that leverage cutting-edge digital and internet innovations in the banking and financial services sector sand how they are used and affect consumers are much more complicated.

In fact, the rise of a new age of FinTech has significantly altered how we conduct business, interact with consumers, and envision the future of finance in a short period. The distinctions between business services are becoming increasingly blurred, making it possible for tech companies, bankers, and advisers to offer equal quality services.

Well, to put it shortly, the fusion of financial services and technology is referred to as FinTech. Fintech companies are basically businesses offering financial services using technology and participating in the fintech industry. This can apply to services like mobile payments, internet banking, and online loans.

Many people consider FinTech firms to be troublesome to traditional financial services. This is because they seamlessly provide digital services that are less expensive and simpler to use than those provided by conventional financial services firms.

Why fintech is growing?

Nowadays, cutting-edge FinTech technology is driving countless innovations and a wide range of other financial possibilities. Digital technologies are concurrently transforming customer expectations and behavior as FinTech advancement tears down the barriers of the old financial system.

When we consider the development of FinTech, several elements are at play.

  • Nearly all of our financial activities have changed due to constant technological improvements. IoT, AI & ML, blockchain, and cloud computing are the main engines that are powering FinTech businesses.
  • Consumer behavior, particularly in Gen X, Y, and Z, has changed massively due to innovations. In some industries, pre-existing financial institutions are unable to keep up with societal developments, which opens the door for technology-enabled companies.
  • As technology has evolved, entrance barriers have decreased, compelling financial institutions to adapt or risk falling behind. For new startups, it has created new and ultimate opportunities.
  • With more information available thanks to statistics, AI, and cloud computing, businesses can spot patterns more rapidly and make necessary adjustments.
  • Investment in the field has been enormous and is expanding quickly, assuring that there will be many more developments in the coming years.

The 3Ds driving fintech companies

The worldwide fintech sector has seen tremendous growth, and it is predicted that it will continue to grow at a CAGR of around 20% over the following four years, reaching a market value of about $305 billion by 2025. Three main characteristics define fintech, which has a strong presence in both the consumer market and the financial services sector.

1. Digitization

Fintech makes use of cutting-edge financial technology to provide individuals and organizations with more authority over their financial health. Digitization is what it all boils down to. All fintech products are built on the swift and widespread acceptance of digital technologies, which has been greatly accelerated by the pervasiveness of smartphones.

2. Decentralization

Decentralization is the second ‘D’ which is driving FinTech companies successfully. Fintech increases financial inclusion by disentangling traditional financial services like loans, bonds, and borrowings into standalone solutions. Digital technologies make it possible for customers and enterprises to forgo conventional pathways and access the services they require more easily and swiftly. Making financial services more readily available to those who lack financial services, promotes financial inclusion.

3Ds of fintech

3. Disruption

The old method of acquiring financial goods and services has been completely overturned by digital technology and decentralized services, which leads us to the third ‘D’ and that is Disruption. One of the biggest drivers in the financial services sector is FinTech and is not going to slowdown anytime soon. FinTech start-ups have been able to propel breakthroughs through faster and at a wider scale since they aren’t constrained by procedures that are ingrained in larger firms by attracting the interest of venture capitalists.

What are the benefits of fintech?

Since the advent of financial technology, several start-ups have benefited from big data technologies and tech-enabled conventional company finance models, fundamentally altering financial institutions and their business models.

Thanks to technology’s potential to provide new opportunities, anyone with internet access can now send or receive money, apply for a loan, or make an investment. Revolutionary fintech marketing methods are driving long-standing stalwarts to embrace new technologies or fear lagging. The following are some of Fintech’s numerous beneficial characteristics.

Higher Productivity and Efficiency

One of the most significant advantages of fintech is that it may significantly enhance the effectiveness and pace of financial transactions. Mobile payments, for example, can be completed in a shorter amount of time than it takes traditional means such as debit or credit cards.

Enhanced Usability

Another significant advantage of fintech is that it can aid in increasing financial access for individuals around the world. Mobile payments, for example, can be used to conduct transactions in regions where traditional banking services are unavailable to the financially excluded.

benefits of fintech

Enhanced Security

With all of the recent data leaks and threats, many customers are worried about their security. Fintech companies can assist in resolving these worries by utilizing innovative technology to strengthen fraud prevention and security protection.

Enhanced Innovation

Fintech is constantly developing and improving by default. This can result in new and innovative products and services that assist both customers and businesses.

What can we expect from the growth of fintech?

Growth, globalization, and digital transformation were unavoidable. The world changed; fintech did not transform finance. Since existing companies were reluctant to adapt to the increasing demands from underbanked and digital consumers, possibilities for fintech to develop and advance the system came into play.

AI continues to Grow

Financial institutions are well-positioned to enhance their reach and relevance thanks to AI. AI can improve privacy, profile threat, assess credit, and give digital help such as bot transactions, financial advisory, and other situations like monitoring dividends across all financial sectors, including payments, lending, insurance, and asset management. Artificial intelligence is being embraced by businesses and investors to the extent that it will be necessary to exist.

Blockchain technology changing the FinTech landscape

Due to its position in digital currencies, blockchain technology is generating a lot of interest and funding; yet, its implementation and effectiveness in financial services are just getting started. The potential of blockchain applications and the reliability and productivity enhancement that blockchain-based apps would offer has attracted a lot of financial industry companies to invest.

Transaction reliability, efficiency, and expenses can be much improved with blockchain technology because it relies on encryption and occurs digitally among participants’ devices rather than during regular business hours at a physical bank. Additionally, the decentralized structure of blockchain makes it possible to observe and monitor all data submitted, making payments clear and verifiable, increasing security and equality.

Tech-enabled financial services

The digital era has finally arrived. Whether institutions are poised or not, it is now time to adopt new technology, embrace the revolution, and compete to become one of the top organizations in the financial sector. Modern finance is changing and becoming more tech-enabled as a result of cutting-edge technology, changing customer requirements, and developing fintech business models.

Reg Tech

Another crucial component of fintech is Reg Tech. This entails utilizing technology to assist financial institutions in adhering to rules. Cost-cutting and productivity gains potentially result from this.

How are Financial Service Industry being revolutionized by fintech?

The disruption brought about by digitalization, decentralization, and the financial services sector is being addressed by various financial institutions. The potential impact of fintech on every facet of a financial transaction encourages traditional firms to explore new chances to increase their product offerings and enhance client satisfaction.

To enhance their current offers, banks, and credit unions are investing in fintech goods and services. Fintech is being used to enhance customer-facing services including private banking, refinancing, and corporate loans, as well as to detect theft, process payments, streamline accounting procedures, and improve these activities.

The digital technology behind fintech has permeated regular financial transactions on the consumer end. The peer-to-peer payment apps that make it simple for people to divide a restaurant tab, the banking apps that let users deposit money by taking a snapshot with their phone, and the apps that make it simple for users to access investments on their own are all powered by fintech.

On the horizon of a new Financial Services Era

So, what does Fintech’s future hold?

Venture capitalists and financial institutions are putting billions of dollars into startups that are creating cutting-edge technologies to upend the conventional financial services industry, fueling the growth of the global fintech industry. Innovation is only accelerating due to the fintech revolution, which radically alters how both individuals and companies receive financial services.

Traditional financial services firms are starting to feel the heat as fintech businesses continue to proliferate. To stay competitive, many banks and other financial institutions are now expanding their fintech sections.

Fintech’s future is still being explored, but it is evident that a new age in financial services is just getting started. The traditional banking approach is no longer financially feasible, and a new phase of development and opportunities is now possible thanks to the FinTech revolution.

Be sure to speak with an expert before starting your fintech adventure. At Antino Labs, we can help you navigate the FinTech landscape and find the right digital solutions to help your business succeed.

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Aditya Pranav
(VP- Engineering, Antino)
Aditya actively collaborates with cross-functional teams to construct customer-centric products. He guides team members in developing clearly defined software functionality aligned with identified business objectives. His skill set encompasses Business Processes, Architecture, Databases, AWS, Process Improvement, PostgreSQL, JavaScript, and Node.js.