Financial technology is the new-age innovation and technology that seek to replace traditional banking methods in the provision of financial services. It’s an emerging discipline that makes use of new technology to enhance financial activities in financial science. In a way, financial technology is a cross branch of engineering, mathematics, information science and computer science that attempts to derive models of financial transactions. These models are then used to provide solutions to real-world problems and make people more efficient with their financial activities.
Fintech has taken a number of traditional banking methods and is using them to supplement, rather than replacing, the services traditionally provided by banks. For example, instead of acting as a bridge or facilitator between borrowers and lenders, this new technology helps the two entities interact and work closely together. This can either lead to more customers and a rise in customer satisfaction or it may lead to borrowers gaining access to loans at better interest rates and better terms than they could have obtained from traditional banks.
The need for a replacement for traditional banks is obvious, especially after many of these institutions suffered severe losses on the recent mortgage crisis. Many consumers took out home loans or refinanced existing ones without consulting traditional banks. As a result, these institutions were unable to sell these products to the end users as they were not able to process the applications in time. Fintech have made the entire process much easier by taking the burden of processing applications off the shoulders of conventional banks and giving it over to specialized consumer finance companies.
The major benefit of financial technology fintech is that consumers get better deals, both savings and loan, and are able to take advantage of better interest rates. This is because these types of companies employ the latest lending techniques. They are also capable of processing loan applications faster than conventional banks. Fintech are not only able to meet consumer demand but are capable of meeting government and industry demand as well.
Another major benefit of fintech companies is that they do not have the same constraints that traditionally financial institutions have. For example, in order to get approval from the Federal Reserve, which regulates all banking activities, traditional banks must first go through extensive credit checks. Fintech do not have this problem because their risk management policies involve collateral placement, reduction of interest rates and other methods that ensure that traditional banks are not directly affected if and when they become bankrupt.
Fintech are not only benefiting consumers directly. These companies are also benefiting traditional banking. As more people use online banking, traditional banks must adjust their strategies in order to stay relevant. To make financial services more attractive to consumers, traditional banks have had to make financial innovations like online bill payment and mobile banking. Simpler online access to financial services has also meant that customers can make financial decisions more efficiently, which ultimately benefits these companies as well.