Financial technology is simply the latest innovation and technology that aim to replace traditional financial processes in the provision of financial solutions. It is also an emerging field that makes use of new technology to enhance financial activities in finance. Fintech are those companies, which have created new financial instruments, or used innovative finance tools to provide financial solutions. In simple words, these companies help in providing financial solutions for clients through the use of new technology.
There are many benefits of using fintech or advanced financial services, which are not available with traditional banks. For instance, fintech have invented novel software and technologies, which can be used to provide complete financial services like settlement, insurance, investing, and planning of wealth. Apart from this, these innovations help clients manage their financial resources in a much better way. Moreover, using such tools can help one to save costs and time, as they can access all information regarding various financial transactions without any difficulty.
Many people often raise doubts regarding the safety and privacy of personal information that is provided by banks. According to experts, traditional banks use proprietary databases to capture consumer’s financial data. However, with fintech, one can access such information directly from the internet or mobile devices. Moreover, due to technological advancements, the security of such information is greatly enhanced. Due to intense competition among the financial services sector, fintech can offer money lending solutions, as it can make borrowing very easy.
However, it is important to state that there are some differences between traditional and fintech solutions. For instance, fintech often provides solutions for a smaller market segment and offers lower interest rates and loan schemes. On the other hand, traditional banking has fixed rate structure, where it only depends on the rate offered by the central bank. Moreover, traditional banking also requires consumers to deposit a certain amount of money as assets.
A major advantage of fintech is that it can offer a variety of payment options to its consumers. This is different from traditional banking, where consumers were required to have a certain level of credit score in order to be eligible for a particular financial product. Today, due to fierce competition among banks and financial institutions, a credit score is no longer a prerequisite. Hence, consumers can apply for loans and credit cards even when they have a bad credit history. Also, while traditional banking requires consumers to keep a large sum of cash on hand, this is not the case with the modern financial products. In fact, many modern products allow consumers to withdraw money from their online accounts even if they do not possess a debit card.
Another significant advantage of fintech is that it eliminates a number of middlemen involved in the financial process. Consumers gain access to more financial products, which helps them cut down on their costs and expenses. Furthermore, financial institutions that cater to customers with poor financial histories gain an important ally in their battle to help consumers recover from financial adversity. Since a number of financial institutions are now providing customers with services that were previously offered only to financial giants, the chances of consumers suffering financial setbacks because of unfavorable financial policies have significantly decreased.