Fintech is making strong inroads into the payments industry and changing the way customers and retailers handle business transactions. While the field is still evolving and some advances are still years away, some technologies are already making an impact. Below are some of the trends that are transforming the way we conduct business:
Traditional Financial Institutions Partnering With Fintech
Not long ago, fintech was competing with traditional financial institutions (FIs) such as banks and insurance companies. Recently though, a new “fintegration” trend is emerging. The two sides have decided to join forces, and the result is an integration of the agility of fintech with the steadiness of the conventional system.
Successful fintegration is a win-win for all parties involved as banks increase revenues, and fintech companies get the legitimacy and credibility of the more stable system. This model is set to continue evolving as new technologies get integrated into the financial systems.
The challenge that remains in coming years is how fintegration can be harnessed for the benefit of customers. Both banks and fintech are aware that they must catch up to today’s always on the go, dynamic customers who prefer quicker and more convenient services.
Using the traditional system to make payments can take several days, leaving customers and cardholders stranded. However, fintegration is enabling the actualization of real-time payments for eCommerce, offline retailers, restaurants, and other businesses.
Also, peer-to-peer payment apps such as Venmo are now allowing users to effortlessly receive and transfer money. Some even have social media elements, such as messaging and sharing.
Also, banks will soon be able to process loan requests remotely and in real-time, completely changing the landscape of the payments industry.
Mobile Trading Opens Doors for New Investors
Open market trading was once a preserve for the few, but the rise of fintech has opened new doors for more traders to access the market. Some fintech apps like Robinhood and Stash even offer free access to markets for stocks and bond trading, bitcoin trading, precious metals trading, and more.
Such services eliminate barriers to entry for new and inexperienced traders, allowing them to start building a portfolio. Millions of young people who would have otherwise been excluded can now try their hand at investing and securing their financial future.
Fintech has brought about the ability for customers to conduct frictionless payments for both online and offline checkout processes. Frictionless payments are have qualities that include:
They save time
They allow for fast checkouts
Very few steps are needed to complete the transaction process
They feel like a natural part of the client experience
They reduce clients’ cognitive stress by reducing the number of passcodes that a client ought to remember
Frictionless payments have several perks for both retailers and customers. Customers save time, as well as pay for things with more flexibility and freedom. Sellers gain from better efficiency at checkouts, and customer satisfaction leads to repeat purchases.
The Subscription Model
The subscription mode of payment is gaining popularity, especially with the younger generation of customers. Fintech’s emphasis on making transaction processes more efficient has played a key role in this.
The subscription model, also known as recurring billing involves automating the invoicing process, which means invoices are sent automatically. The retailer then automatically deducts payment from the customer’s bank account, with their consent. This type of billing saves time and resources for the company, as well for the customer. The customer benefits by no longer having to enter their billing info every other month. It’s a win-win situation for both parties.
Blockchain Technology Acquires Legitimacy
Another brainchild of fintech is blockchain, which achieved recognition with the introduction of the bitcoin digital currency. The technology is still under a decade old, but banks and other traditional financial systems are already exploring its potential for more efficient lending and record-keeping.
Blockchain is an open-source digital ledger that keeps records transactions in real-time. This is unlike the common Automated Clearing House method, which takes minutes or days. According to some experts, banks have so much to gain by adopting the technology – including saving 20 billion dollars annually by 2020. These potential massive reserves of cash are drawing many FIs to experiment with blockchain.
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