As banks evolve, fintech is making progress.
Fintech is progressing major developments for banking institutions and their customers. With fintech, banks can satisfy their customers more effectively and offer them new ways to complete banking transactions.
Fintech is changing the way banks operate. From updated security measures to the way they interact with customers, financial technology is adding value to banking institutions.
Implications of Fintech Developments for Banks
Technology-driven innovation in financial services has affected the banking industry and the activities of supervisors. For banking supervisors, today, it is necessary for them to ensure high compliance standards without inhibiting beneficial innovation in the banking sector. They also need to ensure their institution is safe and free from scams, viruses or any other cyber threats. With our data-driven society, it has become mandatory that banks enable innovative technologies to enhance their institutions. The banking industry has seen many new regulations enter the market so it is necessary for banking supervisors to cooperate with international bank supervisors and managers. These regulatory frameworks need to be acknowledged by new innovative banks if they wish to succeed in this industry. Banks are also using third parties more and more for outsourcing and partnerships so this should not be overlooked by any financial institution.
How Fintech Affects Banks
Fintech is many things when it comes to the financial industry, fintech is when companies use financial technology to make financial services more efficient. Fintech has enhanced savings and investments, fund transfers and payments, lending and even insurance. With fintech development, traditional banking has all but gone out the window. Banking institutions that cannot keep up with the changing way people are now banking, thanks to the fintech industry, will likely not survive past 2020. Progressive banks not only increase their revenue with new offers and business models, they also have lower operational costs through automation. New financial technology has also allowed financial institutions to conduct their operations through mobile devices. This is extremely beneficial because our society is constantly glued to their smartphones. Financial institutions that can offer their customers a mobile-friendly experience will be able to offer them banking solutions no matter where they are. With the rise of fintech, banking institutions and fintech firms are partnering together to leverage the advantage of scale, stability, trust, and access banks have to capital and funding, and the agility to innovation, culture, and technical experience fintech firms have. Fintech is also progressing the move to optional channel delivery to deliver solutions to customers using the best channel for them, based on their needs and preferences. With fintech becoming more and more integrated into our society, banks are starting to replicate the innovation fintech offers to differentiate themselves, while also leveraging their advantages. New banks called challenger banks are beginning to emerge. These banks are built from the ground up and need an established banking firm for back office support.
Risks of Fintech
- Managing Operational Risks from Third-Party Service Providers
- Mitigating Cyber Risks
- Monitoring Macro-Financial Risks
- Cross-Border Legal Issues
- Regulatory Arrangements
- Governance & Disclosure Frameworks for Big Data Analytics
- Assessing Regulatory Perimeters
- Updating Perimeters in a Timely Manner
- Shared Learning with Private Sector Parties
- Developing Open Lines of Communication with Relevant Authorities
- Building Staff in New Areas
- Alternative Configurations of Digital Currencies
The best way for financial institutions to stay ahead of fintech risks is to create a team that is in charge of fintech risk management. When it comes to this risk management team, a fintech report should be constantly updated and assessed to ensure the institution is operating in the most efficient way with fintech. Cybercriminals have compromised many financial institutions over the last few years thanks to updating financial technology. It is imperative for banking institutions to stay ahead of these threats before they compromise the integrity of the company. There are more risks to financial institutions with fintech and they all need to be taken into consideration and monitored for banks to be successful in this new technology-driven realm.
When it comes to banking institutions utilizing fintech, there are many potential risks involved but there are even more benefits. Fintech firms are changing the banking industry in significant ways and making banking easier for customers. Fintech is also allowing financial institutions to satisfy customer wants and needs better and more efficiently. Fintech is changing the way society banks and the way they look at banking.
