Have you ever used the services of PayPal to pay a friend or client? Or have you ever used Venmo for your financial transactions? Then you are already a part of the Fintech world. Even though the word Fintech is still relatively new for some people in the financial industry, it has become a huge part of the day to day life. Some see it as a threat to their business. Others believe it to be the future of the industry.
The word Fintech is a combination of Finance and Technology. It has a straight-forward meaning; the usage of technology in the financial industry including the banking sector, insurance or investment sector, and any other finance-related industry. Chatbots, artificial intelligence, and crypto are a part of this. Fintech has definitely made its place in the financial world today.
Digitalization completely took over the world in the past decade. The financial industry did not prepare itself to be digitalized this rapidly. But with the passage of time finance world is moving towards this modern era of the industry. The dollar investment in fintech has increased from 5% to 20%.
There are many benefits associated with the introduction of fintech in the financial industry. Some of them are as follows:
1) Lesser Costs
By automating processes, costs can be reduced to a very large amount. Due to the lack of physical infrastructure, the organization dealing with fintechs can cut out those costs and reduce their service costs instead. Regulatory technology is one such example. It is estimated that by using RegTech solutions, banks can save billions of dollars annually.
2) Better Decision-Making
Fintech introduces the combination of artificial intelligence with financial strategies. This gives financial organizations much leverage through various in-depth data driven insights. Transparency can be increased through the usage of Blockchain service. Clear and transparent money trails can easily highlight any fraud going on in the company.
With so many benefits being offered by fintech, there are bound to be a few risks attached to it as well. Some of them are as follows:
1) Little Awareness
People are unaware of what fintech really is. Without its knowledge, it becomes impossible to understand its usage and its role in the industry. Moreover, since this a relatively new concept, there are not many rules and regulations defined. There is a chance that organization utilizing the services of a fintech provider may not know what their rights are in case of an emergency.
2) Technology Risks
Technology can have several risk factors attached to them. Most fintech transactions and services use online methods. This is why personal data is at the highest risk in the fintech industry. This is also one of the reasons why there is a lack of trust in this industry.
3) Excluded Niche
Most of the people around the world have access to Internet. But there are still some people who do not have this commodity even today. In order to cater to their needs, it becomes very difficult to completely use the fintech services and get rid of the manual financial strategies and methods.
It is impossible to say that fintech will completely replace the orthodox method of the financial industry. But it is observed with the passage of time that it will only add further improvement to the current financial strategies. With the combination of artificial intelligence and financial strategies, the world of fintech world will continue to soar higher.