3 Fintech Trends Making Huge Waves In The Industry
Though it’s challenging to predict the future of an industry facing such dynamic changes as the financial sector, some developments are easier to guess than others. With an estimated transaction value of $1,265,788m in 2018, fintech cannot be ignored. It’s shifting services away from traditional banking models and towards innovative mobile ones. It also represents an opportunity for growth. The race to match fintech’s success will bring massive changes to the way traditional banks serve their customers. Those ready to embrace this opportunity will make sure to watch the following three trends this year:
- Go digital or go home
As its name suggests, the traditional banking model is outdated. It doesn’t reflect the growing needs of an increasingly digital consumer base. Thanks to the Internet of Things — which is essentially a fancy name for the Internet describing the interconnectivity of devices — people are used to instant access to information from their phones or computers.
They expect the same ease of access with their banking experience. Whether signing up for a new checking account or applying for a personal loan, consumers expect to have their banking needs met entirely online. Some financial organizations are more successful in delivering digital alternatives than others. While the country’s biggest retail banks are slowly adding mobile banking accounts to their line of services, niche fintech companies are still the only ones offering other financial products digitally.
Companies like MoneyKey offer the underserved a way to get an online payday loan fast through their website and their convenient app. Companies like Robinhood provide a way for consumers to trade stocks through their phones. In going digital, these fintech solutions tear down many of the barriers that prevent consumers from getting a cash advance or making investments. As a result, this trend will boost financial inclusion across the board.
- There will be fewer retail bank branches
As more banks follow the path carved by intrepid fintech companies, the need for physical bank branches will decline. There’s no reason for consumers to visit a branch in-person if the same financial services are available more conveniently online. Wall Street reports last year saw a record-number of bank branches closing their doors for good, with numbers falling by 1,700 branches in 2017. Even the most profitable banks couldn’t justify the overhead costs of these branches in the face of falling foot traffic.
The largest financial institutions with international branches will feel the effects of this trend the most. The trick in navigating this trend successfully will be finding the right balance of branches to digital services.
- Fintech and retail banks will partner up
For decades, the traditional banking model went unchallenged, so there wasn’t a reason for these institutions to change their services. Now that fintech companies have emerged as competition, these conventional financial institutions have to adapt if they expect to entice new customers and retain old ones.
According to the PwC’s latest Global Fintech Report, 77 percent of traditional financial services are embracing fintech’s disruptive nature. Not only are they increasing their efforts to innovate, but 82 percent of these institutions are also planning to partner and/or integrate their services with fintech in the next five years.
We’re already seeing these partnerships emerge. In 2015, Capital One purchased the finance app, Level Money. Two years later, it closed the app to fully integrate its services with its own. Meanwhile, mobile banks like Chime and Simple have partnered with The Bancorp Bank and BBVA respectively to achieve FDIC-insured status.
Though you may not have an app to manage your mobile Chime bank accounts now, the changes these services have on the industry will have a trickle-down effect. It may not be noticeable in the new next few weeks or even months, but eventually these trends will transform the way you bank in increasingly digital ways.