What is fintech?
Fintech, also known as financial technology, is the use of technology such as AI, cryptocurrency, and blockchain, to advance and automate financial services and processes. Financial technology is used to help companies manage their operations and processes using specialised software and algorithms on computers, and increasingly, smartphones.
Previously the term ‘fintech’ described the technology employed in the back-end systems of established financial institutions. But, as technology in the industry has progressed along with the internet, fintech now refers to a variety of financial activities such as payment transfers, depositing a cheque with a phone, applying for credit, raising money for start-ups, and managing investments.
There has been a shift to more consumer-focussed services which have been adopted across the sector in retail banking, not-for-profit, and investment management.
Money on the move
Mobile banking is a large part of the fintech market that’s driven by consumer demand. Traditional banks have long used mobile banking, but this has now evolved into banks which only have an online presence.
To date, you can set up a bank account without leaving the comfort of your own home, with access to many services at the click of a button.
When it comes to lending, fintech can streamline the risk assessment process, make approval more efficient and improve the customer journey of acquiring credit. E-commerce companies increasingly collaborate with banks and credit companies to offer short-term repayment loans on the purchase of products. These kinds of credit solutions have a big impact on the e-commerce market, but strict regulation and ethical lending practices must be a priority.
The high street crash
While the rise of online banking platforms, such as Starling, is certainly a factor contributing to the closure of many high street banks, we also need to consider the demise in the UK high street as a whole. Caused by rising property rents, the ease and cost effectiveness of online shopping, and contactless payment offerings, which all form a part of today’s digital world, consumers no longer have a need to visit the high street.
The impact of this is huge, forcing local business and individuals to travel miles to their nearest branch, reducing footfall, in turn impacting the cashflow within towns.
Evolution of traditional banks
It’s fair to say the rise of the digital banking era has forced many traditional banks to update their products, look at new strategies to keep up with the competition, and the needs of the digital consumer. This can only be a good thing, ensuring the industry remains competitive and modern.
Banks need to be aware of their brand and should invest in, and support, ideas that suit their brand identity. Although many customers are using fintechs for their day-to-day banking, brand strength and trust goes a long way. If a customer trusts your brand, they would happily apply for small loans or credit cards without human interaction.
But, traditional banks that offer a personal, face-to-face service will still have a place in the market for certain services. With the threat of cyber security and phishing scams, perhaps there is a case to argue that some consumers who seek financial advice or large transactions, like a mortgage or ISA, will still want a bricks and mortar, face-to-face service solution, with the opinion that it is a more secure option.
Fintech affecting the job market
The dynamic banking industry now looks for candidates that can demonstrate a growth mindset and prove they can embrace and adapt to change quickly. Of course, it goes without saying that tech skills are now highly sought after and candidates that keep up-to-date with emerging technology will be best placed.
Fintech organisations will seek strong data analysts to decipher large quantities of financial data, and as machine learning and automation becomes further immersed in the workplace, experts in this field will be sought too.
The digital world presents new threats such a cyber attacks and as a result, fintech banking firms will need to increase their spending and focus on staff in the security field. As specialist recruiters in the industry, we’re seeing a real increase in these roles and the strengthening of general risk, compliance and reporting teams.