Benefits of Financial Technology in Retail Banking

Banking CIO Outlook | Wednesday, August 24, 2022

Retail banking encompasses all the banking services customers receive from their bank, including their accounts, loans, and online banking services.

FREMONT, CA: Changes and technological advancements are paving the way for practically everything in our lives to be accessible online in the present day. The development of financial technology (fintech) has resulted in the constant emergence of alternative solutions and business models, which may render traditional banking methods obsolete.

FinTech drastically modifies the execution of certain financial services, enabling the delivery of current financial services and products in novel ways. Numerous startups have emerged, offering more specialized, cheaper, and more convenient services than established banks.

It is now a trend that has caught not just these startup businesses but also the banks themselves, forcing them to adapt to this new banking sector upheaval to prosper.

Financial Inclusion

FinTech has substantially expanded financial access. It has given common people access to formerly reserved services for the privileged or those of a particular economic standing. For illustration, consider the field of investments. It is now easier and less expensive to provide investment advice to the general population. This indicates that what was once restricted to a specific group of individuals is now available to everyone.

A further illustration would be lending. Previously, lenders had few data sources from which to analyze risk. This implies that many individuals are rejected loans or pay higher interest rates.

Fintech currently uses numerous information sources when underwriting consumers. As a result, it created more opportunities for the public. Fintech has made it easier for those with poor credit to receive acceptance for an online instalment loan.

According to the World Bank, 31 percent of the global adult population does not have a bank account. This refers to people who do not have access to a bank account or credit institutions. Some of the reasons mentioned by these individuals were the inaccessibility of financial institutions, the high cost of opening an account, and the absence of required papers.

However, with the introduction of fintech, for the very first time in modern history, multiple persons of varying economic status could acquire access to essential financial services.

Provision of more affordable, effective, and convenient financial services

One of the benefits of fintech development is the provision of services that overcome some of the limitations of payment systems noticed by traditional banking institutions in the settlement of financial transactions.

People still need to visit banks to conduct payment transactions, which is a prime example of a geographical barrier that imposes a constraint. People began utilizing fintech services such as digital and mobile wallets, mobile point-of-sale terminals, and peer-to-peer transfers as fintech advancements eventually overcame such limitations.

The benefit of utilizing these services is that they are easily accessible via mobile phone applications that support some digital versions of credit or debit cards. In addition, it is easy to use because the consolidation of payment methods expedites the purchase processing time.

It offers digital or mobile wallet services, allowing customers to transfer funds between any two wallets on the site instantly. Typically, the client deposits cash into his bank account connected to his digital or mobile wallet. With sufficient funds, the client can transfer funds to another user. These transfers by fintech companies are less expensive, quicker, and more convenient than those by conventional carriers.

It is less expensive since it incurs reduced operating expenses and charges lower fees. It is quicker than bank-to-bank transfers, in which clients are served in their physical branches and subjected to multiple security procedures before money transfer.

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