5 ways FinTech and banking can work together for a better future for the financial industry

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Sometimes, the business environment changes the form of technology, which is an overall improvement for people and their behaviour. This era of drastic changes has introduced a powerful influence – the synthesis of the traditional banking and FinTech that naturally changes the business. 

Financial institutions and FinTech companies progressively realize the necessity of cooperation rather than perceiving other entities as competition. 

This is how they create the synergy that will invariably lead to growth opportunities for end-users and institutions. 

So, let’s discuss how bank-fintech partnership can enhance the financial industry landscape in the next few years.

What is FinTech?

However, before further discussing FinTech and banking collaboration, defining what FinTech actually means is more essential. FinTech resorts to new technology innovations to boost the efficiency of financial services, increase access, and place customer interests at the centre of everything. 

FinTech companies utilize the capabilities of AI, data analytics, and cloud computing to transform the financial service sector and resolve market challenges. 

FinTech is revolutionizing how people and companies take care of their finances. It makes financial services accessible to everybody and has armed the economically weak to compete. The innovation in fintech incepted creative digital solutions that bring convenience to the banks users in their regular banking.

Here’s how the digital fintech solutions contributes to upgrade the financial and banking business.

1. Better customer experience

Whenever FinTech and banks are in partnership, one of the most outstanding achievements is that the customers will have a convenient time interacting with the banks. The Fintech companies are deemed to be the forerunners in the sphere of innovation. 

These usually are straightforward to use, with the extra benefit of having tailor-made services handled according to the user’s requirements. 

Banks collaborating with these businesses can derive wisdom from the interaction and make the banks’ digital platforms function better, and the processes run with less friction. 

Offering solutions like mobile payments, budgeting tools, or personalized financial advice through FinTech is becoming increasingly competitive. In this case, banks can draw and retain customers by applying FinTech.

Banks give themselves an advantage by having the ability to study the habits of people using data science (DS) and artificial intelligence(AI). It enables them to give a more extensive variety of products and services.

 2. Innovative digital products

The new financial goods and services are genuinely innovative when two elements, i.e., the banks and FinTech companies, are collaborative. 

Usually, large traditional banks will comprehend many regulations while accessing a tremendous amount of money. However, these FinTech startups are excellent at offering technology-fueled products with an unmatched speed of adaptation to changing market conditions. 

They can create new products to fulfill the most pressing needs of developing countries by consolidating their strong points if they work together. 

Some years ago, creating digital wallets, peer-to-peer lending, and robo-advisors was possible through partnerships between banks and FinTech companies. These deals satisfy fast-changing customer demands and allow all parties to make more profits, expand their brand visibility, and build a reputation in the market.

 3. Risk management with regulatory technology

Time today is when regulators are paying more attention, and online threats are growing; hence, it is all-important for financial institutions to have risk management and compliance systems in place. 

FinTech companies are usually professionals with in-depth knowledge of more secure systems, blockchain, and RegTech. It can be helpful for banks to partner and collaborate with these companies so they can upgrade their risk management systems, respectively, and meet new legal requirements. 

Using a blockchain to make the transaction process safe and transparent, as well as AI-powered for KYC and AML checks, can help banks lower risks and meet legal regulations more. 

In addition to that, banks can achieve better control with governance, cutting operation costs and speeding up compliance processes by cooperating with RegTech startups.

 4. Financial inclusion and accessibility

Working together, banks and Fintech companies can bring financial services to the doorsteps of the underbanked regions and the rural areas where banking services are almost non-existent. 

The FinTech innovation has made things easier in the ecosystem; for instance, mobile banking and digital wallets have been game changers for millions globally who don’t have bank accounts or enough money to meet their requirements.

Banks can use FinTech regulatory expertise to increase the number of people getting the needed services. At the same time, FinTech companies can rely on banks’ distribution networks for the same purpose. 

For example, joint efforts of banks and microfinance startups can facilitate the affordability of family loans for people living on low incomes. This may be a good help for the economy to grow and give people power in economic life.

 5. Building a resilient ecosystem

When we cross the threshold of financial markets becoming more integrated, banks and FinTech companies have to collaborate to make the system more robust against disruptions from both internal and external sources. Banks and FinTech coincide to face risks of a systemic nature and thrive in the financial system by sharing resources, know-how, and technology.

As a second instance, coordination on cyber security, exchange of data, and preparing recovery measures from cyberattacks, natural disasters, or getting out of recession would ease the impact of these hazards. Development collaboration between banks and FinTech organizations gives rise to new concepts and products in the business world. 

Conclusion

FinTech and traditional banking partnerships involve various benefits such as innovation facilitation, consumer interface improvement, and the creation of more money resources. By utilizing each other’s distinctive competencies, banks and FinTech companies can cooperate to create a well-rounded scenario for both entities. 

Banks and FinTech companies are cooperating to make the financial industry’s tomorrow brighter by enhancing digital skills and launching new products, reducing risks, and appealing to more people to be involved in financial services. Cooperation has remained a cornerstone of finding the possibilities for further growth even in the digital age characterized by the change in the economic systems.