Shamayun Miah - Impact Of Fintech On The Future Of Financial Services

In the last several years, the financial services industry has changed dramatically. Historically, banks were hostile to technology. "If we were to have this conversation five years ago, I would have told you that the banks view fintech as a very much us against them - anything they do is something that we could do," says Peter Tapling, a fintech and payments specialist.

Fintech businesses were viewed as potential rivals that may steal their business. Today's financial institutions, on the other hand, are enthusiastic about fintech. Tapling, who spent 15 years as the CEO of authentication provider Authentify before consulting with various financial services firms, believes the sector is "shifting a lot" and that financial institutions are eager to collaborate with fintech firms to offer new services and enter new markets. When it comes to the reasoning for this, Tapling discusses the challenges that enormous businesses have when launching new bank projects. "If you look at the way we do development these days, fail quickly, build a tiny, minimum viable product, that's not the way a major bank operates," he says. Banks, on the other hand, turn to partnerships to fill in the gaps.

 

With the emergence of blockchain, a new type of lending movement is gaining traction: decentralized finance. This arrangement allows you to borrow money from network members to pay for assets that require legal tender payment. The borrower can get a loan by pledging the bitcoin that they hold. Facebook is also working on a digital payment system called Diem, which was previously known as Libra. Within the Facebook ecosystem, Diem wants to offer easy in-app payments. Policymakers were concerned about the project's impact; thus, it hit some roadblocks. Policymakers fear that it would cause severe issues in the financial system, such as money laundering and competition with the US dollar and other fiat currencies. Diem is gaining traction as a distributed ledger-based in-app payment system with a smaller reach. Shamayun Miah, the author of an article titled “The Future: Fusing Fintechs and Financial Institutions” noted that the use of blockchain technologies, and the cost of serving a customer in the near future will be a fraction of the cost compared to traditional approaches today.

Central banks' interest in developing digital currencies has increased as a result of Facebook's efforts. Project Ubin in Singapore and the Digital Yuan in China are two examples. The Bahamian Sand Dollar, the world's first digital central bank money, debuted in late 2020. Even five years from now, we may anticipate additional developments in the financial services industry. The number of community financial institutions is expected to plummet, while the number of digital financial institutions is expected to increase dramatically. In a high-tech world, community banks will have an even harder time competing.

The advent of open banking is excellent news for banks since fintech will supply consumers with front-end applications while banks handle back-end services. To compete against fintech firms in the following years, banks and other financial institutions will need to develop or invest in a data strategy. They risk losing revenue if they do not begin to expand their data capability and produce data-driven solutions. We can only accomplish this by embracing new technologies and even forming collaborations - regardless of whatever path they follow, adapting and pushing for ongoing innovation will always be a need. According to Shamayun Miah, those that take advantage of innovative business models, emerging technologies, new skills, and are successful in establishing and maintaining trust with consumers and partners, will have a monumental opportunity to capture border-less market share.

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