FinTech in Banking; A Comparison of the Developing and Developed World:
The term “FinTech in Banking” refers to the category of companies that focus on changing the financial world through new technologies (Menat, 2016). These areas of change can range from payment systems to loans, loans, investments, and so on. FinTech companies have become increasingly popular in the years following the 2008 financial crisis. There is a latent mistrust of banks and a desire for better, personalized customer service.
FinTech companies are trying to find their niche in providing customer services that big banks may not be able or willing to provide. The subtlety and skill of most of FinTech’s technology companies allow them to provide cheaper services through well-designed applications.
The three main functions of banks are:
(1) accept deposits and provide a safe place to deposit money paying interest;
(2) facilitate payments (cash, cards, wire transfers)
(3) borrow money
FinTech companies can focus on parts of these capabilities by gaining market share and customer approval. Many FinTech companies in the banking and investment sector want transparency. He clings to the idea that the banking system is unreliable and transparent. For this reason, reliability and security are some of the most important characteristics that FinTech companies can demonstrate. One of the ways companies can incorporate these characteristics is through regulatory compliance. With new technology comes the fear of cybercrime and data misuse.
The regulations are designed to protect citizens from predatory or fraudulent financial practices. With so many new FinTech technologies and startups, regulation is critical to the financial protection of clients and customers.
While regulation can reduce profit margins, fintech companies must accept it and ultimately use regulation to their advantage (Wendenburg, 2016). As the banking industry is global and applies to almost all demographic groups, I would like to explore how new banking-focused FinTech companies are shaping their operations around the world.
To do this, I looked at two companies, one in the US and one in Kenya, to see how companies in one area approach a concrete financial regulatory framework and another with a less-developed framework. I analyzed each company’s business models to determine the risks and rewards in their respective business environments and analyzed stock performance over the past five years.
Literature research banks have historically served as lenders and a safe place to store money to earn interest. For a variety of reasons, financial technology companies (FinTechs) are beginning to change the way society views banking, lending, investing, and purchasing.
First, traditional banks have lost a lot of public confidence due to events like the recent Great Recession of 2008. According to the CCP Research Foundation, the world’s 16 largest banks have incurred $306 billion in execution costs since June. 2015 (Mead, 2016). Due to the distrust of banks, consumers are looking for more power over their money and want to give it to FinTech companies.
With their small scale, flexibility, and excellent technology, FinTech companies can create a customer-centric business model that traditional banks have difficulty satisfying (Mead, 2016). Generation Y is also old enough to become a customer of financial services companies. Technological skills provide more innovation in financial services than was possible due to the uncertainty of public sentiment towards technology.
Finally, FinTech companies can improve their technology, allowing them to provide services that cost less than traditional banks and improve the customer experience. By choosing banking services and specializing in one aspect, whether it’s mobile banking or sub-bank lending, FinTech companies can compete with banks that suffer from the “handyman, boss or nobody” situation (Glas, Truszel, 2016).