The financial and banking sector has already undergone overwhelming changes in the last 10 years.
Online banking and the digitization of banking operations have already transformed financial services.
As usual, tech giants are leading the pack. In 2019 Apple has launched a new product, which comes as no surprise, given that the brand is famous for innovations. This time, it was not a new gadget. It was a credit card.
Apple is no exception, though. Companies in both B2C and B2B sectors are adding banking and finance to their palette of services, allowing users to leverage such features as P2P lending, payment processing, etc. Companies like Uber, for example, are now generating revenue not only through margining on rides but also via providing banking services to drivers, who are more likely to stay loyal to a company that fulfills the need for secure and hassle-free banking.
The trend is the same in the B2B sphere, as it turns out, almost 50% of Shopify revenue comes from providing financial services, apart from helping merchants build online web stores.
So What Is the Driving Force behind These Changes?
The ongoing digital transformation offers companies room for experimentation. In 2022, entering the software development market is way easier than it was 10 years back before the advent of cloud services completely reshaped the ways IT infrastructures are deployed. Instead of investing in physical services and costly software licenses, businesses can now rent a secure cloud environment for a reasonable fee and use a Software-as-a-Service (SaaS) model for gaining access to development tools. This allows them to quickly launch and test innovative products and venture into fields they previously did not dare to even consider.
In banking, the situation is very similar. In the past, getting into a banking business used to be quite difficult. Ensuring licensing, regulatory compliance, effective processing of payments, data analytics and fraud prevention involved forging partnerships with at least 12 companies, and took immense effort and about 2 years of building partner relationships. At present, the trend lies towards the emergence of companies that help businesses build licensing, compliance and fraud-prevention infrastructures for effective banking on as-a-service basis. Companies like Plaid, Synapse and Comply Advantage are currently helping businesses to start delivering financial services faster and more effectively.
Another factor that facilitates fintech adoption for companies is the rise of Open Banking, a technology that uses open APIs to help developers build financial services. Born in 2016, Open Banking addresses the need of both newly emerged and incumbent financial companies to give access to their transaction data, compare accounts and create new services by enabling them to turn to regulated providers.
Ultimately, all financial market participants will benefit from the transformations in fintech. Entrepreneurs can leverage opportunities to build fintech infrastructures for banking and accelerate the launch of fintech products. Established financial firms will be able to modernize their legacy systems and develop new solutions, and every company out there will have all it takes to serve, retain and attract customers through offering them financial services.
