In years past, the occupation of bank manager used to be respected, even if staid and unexciting. Banks played a valuable role in society, and were seen as trustworthy and able to help in a financial emergency. However, the financial crisis of a decade ago has significantly devalued that impression. Rightly or wrongly, the entire banking industry has, to many people, become tainted with the impression of greed and irresponsibility.
A 2016 survey by Ernst and Young showed that nearly a quarter of US adults now have little or no trust in their banks' ability to provide unbiased advice. When combined with a general rise in mistrust of corporations among the millennial generation, it becomes clear that the traditional banking industry faces serious challenges indeed, not least from a fast-emerging aspect of the finance industry that is turning many established conventions on their heads.
FinTech, or financial technology, is a sector which has burst onto the scene over the last decade, neatly stepping into many of the gaps left by the financial crisis. As the name suggests, FinTech relies on leveraging technology to increase the efficiency of the financial industry, and is responsible for the disruption of many established business models.
Perhaps the most widely known example of a FinTech company is PayPal. The simple idea of being able to send money via email has changed the way much online business operates, allowing many smaller businesses to trade outside the confines and complexities of traditional merchant accounts.
The FinTech concept is spreading throughout the finance world, greatly aided by the rise in mobile technology, which is fast becoming the predominant method for younger generations to interact with business, and the preferred method for tech literate consumers in general. In which other areas does FinTech threaten the establishment?
Credit is the part of the finance industry with which most people have the greatest experience. The days of visiting your bank to apply for a loan in person, however, are largely over. From purely online finance applications to more esoteric and revolutionary ideas such as crowdfunding, the provision of credit is slowly but surely slipping out of the grasp of the major institutions. This is particularly the case in developing markets, which Western banks have long viewed with caution.
Traditional insurance relies on the model of averages, spreading risk across a homogeneous market. InsurTech abandons this approach, instead using data manipulation to provide highly tailored services, and customized products tightly defined to their clients' needs.
While stockbroking professionals can still offer a valuable service, combining advice with execution, it's now easier than ever for small investors to trade online. From currency exchanges to traditional stock markets, trading is now open to everyone with internet access.
PayPal is an excellent example of how a simple idea can disrupt an entire industry, but the company has also spawned a number of imitators. Many of these smaller companies are particularly important in countries without an established bank transfer system open to the general populace.
There has been a huge amount of publicity surrounding Bitcoin and other digital currencies, and sometimes it's hard to see where the hype ends and reality starts. However, with major companies from Microsoft to Expedia accepting Bitcoin payments, it's clear the disruptive alternative is alive.
According to Tableau Software's "Top 10 Business Intelligence Trends for 2017" white paper, "Over the last few years, data has become the lifeblood of organizations. Those that harnessed the power of this data by empowering business users found competitive advantage and were able to innovate faster. This change caused tension in organizations between the old way and the new modern approach to BI. Tension grew between control and agility, self-service and governance."
Clearly, innovative FinTech disruptors are giving lagging BI adapters in the banking industry a run for their money. Closer to home, financial advisory practice owners can readily apply advanced BI tailored to continuously improve their business and operating performance with the industry's leading BI platform at Truelytics.com.
Lastly, FinTech is allowing new markets to develop in areas which major Western banks have traditionally avoided. Signs indicate that financial power is spreading more evenly throughout the world, particularly in Southeast Asia, rather than being entirely centered in traditional bases such as Wall Street or London.
The international banking sector remains huge, and it's unlikely to be killed off anytime soon. In fact, it's far more likely that FinTech methods will be adopted and absorbed into mainstream finance. However, one thing's for sure: from Bitcoin to crowdfunding, financial technology is set to change the banking landscape in imaginative ways.
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