The Change and Impact of Fintech To The Financial Industry

The Change and Impact of Fintech to the Financial Industry
Fintech has changed the financial markets around the world, with its
effective changes arising from the devising of advanced technologies such
as big data, blockchain, artificial intelligence, and automation. A number
of these changeable technologies alter sectors as broad as banking,
lending, payments, wealth management, and insurance. Since 2015,
fintech startups have transformed the mode of the financial market most
aggressively in developing countries, like India. The COVID-19 pandemic
has accelerated this process further by spurring the need for more digital
financial services, which would advance financial inclusion while averting
the reliance on traditional banking systems. Fintech has turned out to be a
strong innovation that is a transformational force affecting the old banking
industry with new modes of efficiency and accessibility to customers and
firms. The following are some of the areas where fintech influence is
evident:
Key Takeaways About Fintech Impact
1. Fintech and Efficiency:
Reducing Costs of Intermediation: Fintech companies have drastically

reduced the cost of financial intermediation. They cushioned the
historically systemic information asymmetries problem in the banking
business. As a result, they can provide their services cheaply in contrast
to other banks.
Peer-to-Peer (P2P) Lending: Enablers such as Lending Club and Prosper in

the United States, and Zopa in the UK enable borrowers to connect
directly with lenders, circumventing the middlemen in the banks. They
mostly rely on big data and algorithm-based risk profiling of borrowers to
speed up loans and decrease costs.
Operational Efficiency: Since fintech firms do not have legacy

technologies, they are able to build ways of working that are more
operationally efficient and streamlined. Additionally, due to their focus on
innovation and agility, they can fast-track new technologies and thereby
enjoy advantages over traditional banks that are saddled with out-of-date
infrastructure.
2. Payment Systems and Digital Disruption:
Rise of digital payment platforms. PayPal, Apple Pay, Google Pay, and
Amazon Pay have emerged as principal players in this area, also providing
consumers with ease of smooth transactions, especially through mobile-
based payments. They have picked up tremendously across the unbanked
populations in Africa and other corners of Asia.
Blockchain and Cryptocurrencies The blockchain, backing cryptocurrencies

like Bitcoin, is transforming the foundation of payments. The blockchain
makes it feasible for secure, decentralized transactions between parties
concerned (without needing a middleman in the form of banks) and cuts
the costs incurred from every transaction, with complete transparency. It
enables the transaction between peers on public digital ledger, thus
overthrowing the traditional mode of payment systems.
Mobile-Based Financial Solutions: In regions with very low penetration of

bank accounts, such as Africa, mobile-based payment solutions are
bringing access to financial services for the unbanked. It has also been
able to push the entry of access to micro-loans and other financial
products for people with minimum or even limited credit history, hence
facilitating financial inclusion.
3. Robo-Advisors and Wealth Management:
Automated investment advice. Robo-advisors are described as low-cost,

automated financial and investment advice providers using artificial
intelligence. The tools depend on data garnered about the client's
financial situation to recommend investments, potentially charging a
fraction of the cost that a similar investing with human advisors might
incur. Their appeal is considerable to the young, savvy investor who
prefers digital services.
Conflict of Interest: A conflict of interest of the type that sometimes exists

with human financial advisors generally does not exist with robo-advisors,
such as biased recommendations tied to commissions. Therefore,
roboadvisors are a neutral alternative available to consumers who prefer
unbiased financial advice.
Growth in the U.S. and Europe: Though the domain is still very nascent in
Europe, robo-advising is growing rapidly in the United States, where
assets under robo-management are much higher. With more investors
looking for digital alternatives to traditional wealth management, the
technology is set to expand.
4. Effect on the Conventional Banks and Market Structure

Loss of Traditional Banking Model: The new model that Fintech presents is
based on codifiable or "hard" data and used to make decisions in the area
of lending and investments. This changes the model of traditional banking
from a relationship based one. It knocks out the reliance on "soft"
information acquired by banks through close personal relationships with
their customers.
Avoidance of Banking Licenses: Many fintech companies opt to refrain
from getting banking licenses and thus avoid the high regulatory and
compliance costs that traditional banks are exposed to. They target high-
yielding areas of the financial market, like lending, payments, and wealth
management.
Potentials of Big Tech to cause further disruptions in financial services:
Companies like Amazon, Google, and Apple - all the major technology
players- are well positioned to disrupt the financial services sector further.
Armed with access to gigantic amounts of consumer data and established
digital interfaces, they could provide payment services, lending, and even
financial products like loans and insurance. So far, their involvement has
been relatively limited, but these companies hold enormous potential for
market transformation.
5. Fintech in India:
Fintech Rise in 2015: In the early times of 2015, the fintech revolution
invaded India, and players like Paytm, Razorpay, and Google Pay rewritten
the textbooks on payments, lending, and asset management. Today,
digital wallets and payment apps make their way into our daily lives,
whether to buy groceries or to recharge a mobile.
Impact of COVID-19: Covid-19 Accelerated the Adoption of Fintech
Solutions in India. Lockdown has played a critical role in maintaining
economic activity and extending financial inclusion in India with the help
of digital financial services. Fintech companies have bridged the gap for
economically weaker household consumption and small business income
streams through digital payment platforms and lending solutions.
In 2019, India accounted for more than 32 billion digital transactions. The
value of these transactions accounted for ₹69 trillion in 2019. However, in
2025, it is expected that digital transactions in India will exceed ₹238
trillion and show tremendous growth and acceptance of fintech solutions
in the country.
Advancement of Financial Literacy: Fintech platforms have also resulted in
the advancement of financial literacy and awareness in India too. The
consumer is offered digital solutions that help him to arrive at EMIs of the
loan, premiums of insurance policies, and other finance products that help
the consumer in taking informed decisions.
6. Future Scope and Large-Scale Disruption:
The disruption of all things traditional banking is huge because fintech
continues to mature. The industry should expect advancements in AI,
machine learning, and blockchain that will support the industry's move to
continue its growth trajectory toward transformation in the delivery of
financial services around the world.
Regulatory Issues: Fintech's entry into traditional banking space would
raise regulatory questions. Issues of government guarantees, deposit
insurance, and compliance costs will shape the future of fintech and its
role in financial markets.
The banks and Fintech firms are being made to work together to provide
consumers with solutions to their entire range of financial-related issues,
as the best combination of traditional banking and fintech innovation can
be delivered only through the union of both.
In short, fintech is the driver for change in the financial sector and, at the
same time, an essential enabler of financial inclusion, efficiency, and
innovation. Its impact on traditional banking structures, payment systems,
and wealth management is already profound, but given the progression of
this industry, it will be likely to drive finance into a new future at a global
level.

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The Change and Impact of Fintech to the Financial Industry

Key Takeaways About Fintech Impact

1. Fintech and Efficiency:

Reducing Costs of Intermediation: Fintech companies have drastically

Peer-to-Peer (P2P) Lending: Enablers such as Lending Club and Prosper in

Operational Efficiency: Since fintech firms do not have legacy

2. Payment Systems and Digital Disruption:

Blockchain and Cryptocurrencies The blockchain, backing cryptocurrencies

Mobile-Based Financial Solutions: In regions with very low penetration of

3. Robo-Advisors and Wealth Management:

Automated investment advice. Robo-advisors are described as low-cost,

Conflict of Interest: A conflict of interest of the type that sometimes exists

4. Effect on the Conventional Banks and Market Structure

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