Does fintech take the place of conventional banking?
29 Dec 2022
Does fintech take the place of conventional banking?
There has been a very noticeable, clear shift in the demand for financial services recently. It appears to have happened as a result of the population being primarily young and the older age embracing technology at a faster and faster rate. The younger generation expects technology-based business services that are better and faster. FinTech startups in India are rapidly challenging existing banking models. However, most individuals still believe that banks are the safest option, especially when it comes to depositing their valuable savings. Therefore, banks do have a solid, established clientele over the long term, despite the difficulties brought on by legacy infrastructure that prohibit them from adopting changes quickly. Consumer adoption of FinTech was 87% in India in 2019 compared to the global average of 64%. Consumer demand did not decline even after the epidemic started, and the business industry expanded significantly until 2020. A statistical poll from April 2020 found that 33% of respondents continue to use the digital method for a range of financial services, such as paying brokerage fees and making recurring payments. For example, statistical data indicates that in February 2021, the volume of UPI transactions climbed year over year by 70% while the value of those transactions increased even further. India's FinTech industry is one of the largest and fastest-growing in the world, with more than 2,100 start-ups, second only to the United States. Two-thirds of start-ups operating in a range of sub-sectors, including peer-to-peer (P2P) transactions, lending, insurance, and mobile point of sale (POS), among others, have appeared in the previous five years in India, where the industry has seen substantial growth. Over the past ten years, India has built a top-notch FinTech infrastructure with the help of the Aadhaar biometric identity system, the Unified Payment Interface (UPI) cashless payment system, and the India Stack, which comprises four major technical layers. Due to its open APIs, India Stack has significantly aided the company's business expansion. Traditional banking methods are still used for basic activities like withdrawals, deposits, and bill payments, despite the fintech industry's rapid development. Any economy needs conventional banking. They give lenders the chance to accrue interest. On the fifth day of the BFSI Insight Summit, Aditya Puri, a former managing director and CEO of HDFC Bank, made the announcement. In the future, banks and fintech businesses would coexist, expand via collaboration, and there would be space for everyone, he continued. Because the business is not heavily regulated, many FinTech start-ups can easily succeed. Although they operate more swiftly and are more responsive to customer needs, the absence of laws and regulations makes it a risky industry for customers. Due to the fact that traditional banks are held accountable by a regulatory body in the background, the majority of retail and youthful investors feel safe choosing these institutions. On the other side, traditional financial service providers have welcomed the entry of FinTech into the market. Most banks now offer their customers access to online banking features like mobile payments, peer-to-peer lending, and digital security through online banking websites and applications that include an enlarged FinTech version of their banking system. Conclusion: If fintech and traditional banking collaborate over time, their services and features can be improved and their overall impact increased. Banks hold a lot more deposits than FinTech, who only hold extremely little amounts. FinTech will benefit from the significant funding and may collaborate with banks to enhance financial systems in order to take full advantage of this.