Fintech and the Services Sector
As the world stands on the doorsteps of another technological revolution which has all the potential to change everybody’s life and work fundamentally, it is increasingly looking possible that a total disruption of several industries and their business models is in the offing. The transformation, in all its scope, scale and complexity would be unlike anything that businesses and their owners experienced before. While it may be still early to predict how things will unfold, it’s clear that the response has to be comprehensive, involving all sectors of the economy and markets.
Over the past few years, fintech is one term that has generated a lot of interest in the services industry, especially in the financial sector. A recent study by Business Insider (BI) Intelligence, on how fintech is spearheading an unstoppable transformation in financial services industry, revealed that venture capitalists have poured millions into this fast burgeoning technology-driven sector. Investments, in fact, have grown 10 times in the last few years which have created a concern about a fintech bubble in the minds of some of the investors. The BI Intelligence report, however, has assuaged fears about the long term viability of fintech.
Banks, these days, have an oversized but a largely inefficient infrastructure to overcome. They are often unable to cater to customer needs. A large part of a bank’s customers today comprises of the tech-savvy smartphone-wielding millennial generation that’s always hunting for customized and easily accessible services. And fintech has grabbed this opportunity because it can disrupt almost all areas of business, right from backend support to the front office. Fintech companies are extending an improved customer experience and a cost-effective operational structure.
How fintech has affected the services sector
There are several facts on how fintech has disrupted the services sector and why it’s gaining increased acceptance in almost all other industries. Here are some of them.
· Fintech is good at developing new technologies. At the same time, it can fix multiple business problems to forge an improved customer experience, particularly for small businesses and independent professionals.
· Make financial services accessible to the people of underbanked countries that improves the sustainability of small businesses.
· Real-time and transparent fintech operations like digital currency and blockchain generate new value streams in the entire services industry.
· Not only monetizing data, but fintech has also unleashed a new way to generate value-added services from collected data which was previously limited because of unavailable relevant technology.
· Businesses get access to near-infinite data which is not the old-styled data mining. It’s rather an exhaustive learning which lends a previously unimagined insight for companies to come up with improved and individualised services.
· Consumers can execute their transactions better through their smartphones and tabs improving both experience and efficiency.
· Innovative fintech services like chatbots and robo-advisors have what it takes to extend financial advice beyond sophisticated investors and reach a bigger cross-section of the community.
· As more digitized transactions start supporting better audit, transparency in payment systems are automatically enhanced, cutting the need for preventive regulation.
· Fintech drives improvements in the conventional services and promotes disruption via innovative offerings that benefit the economy as a whole.
· One of the biggest things that fintech has done is to create a level playing field in the economy and reduce the asymmetry of information in the marketplace.
· Fintech has unleashed a new age of innovation and competition in various regional markets.
Fintech as of now
Fintech is a dynamic segment at the crossroads of the services industry and the technology sector, where new market players and tech-focused startups innovate products and services currently provided by traditional organizations. Fintech has gained significant momentum and is causing disruption to the conventional value chain system and contributing to the economies of various markets and countries. Fintech companies with cutting edge technology and new market activities have redrawn the competitive advantage. Professionals like IT consultants, accountants, tax planners and others are exploiting the benefits of fintech to the fullest.
What will drive fintech?
Fintech insurgents have new and clever risk management techniques. They collect information from every possible source and on everything, right from how companies are using logistics firms to reviews on the social media, to assess how small businesses are performing. In the banking sector, data-driven lending has a clear advantage over decisions that stem from a single credit score or a meeting between the banker and the client. Humans have more prejudice than AI algorithms. For instance, Italian banks are known to charge women entrepreneurs of small businesses more than their male counterparts, notwithstanding the fact that women have lower rates of failure. The cost of relationship lending will encourage bankers to chase big customers and not the small ones. For young entrepreneurs and small business owners on the fringe of the lending system, risk assessment which scours the internet for information is far better than a loan officer of a snobbish bank.
The digital revolution has transformed the behaviour of customers in the way they access products and services. It’s the ease of executing transactions that have been the key takeaway. The service sector especially has undergone a big change in recent times. But the uninterrupted advancement of tech-driven apps in almost all segments of the service sector, particularly financial services, is a more recent phenomenon. Fintech is at the intersection of finance and technology.
Artificial intelligence, mobile supercomputing, robo-advisors, self-driven cars, genetic editing, are all around us. The dramatic change is happening at an exponential speed. Industry observers are dubbing it as a ‘fourth industrial revolution’. The arrival of digital technologies are probably causing the most profound changes in the financial and allied services sector since the 1970s that saw the introduction of large-scale computerized banking and ATMs. No firm can stay immune from the inevitable disruption. Every company has to put in place a strategy to harness the undeniable advantages of the fintech revolution. Consumers, needless to say, will be the greatest winners with technology making access to services easier.
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