For decades, banks and insurers have used the same profitable business plans and strategies to gain profits and ensure their monopoly of the finance industry. However, it’s now being confronted by innovators on all sides that are affecting how money is being circulated in the economy and not go through banks and other financial institutions. This article will try to understand how internet technologies have dramatically affected banks and other financial institutions by these “fintech” innovations.
With the emergence of crowdfunding, peer to peer lending, mobile payments, bitcoin, Robo-advisers, etc., there seems to be no end in the bombardment of the business paradigm of financial industries that have been applicable for a century.
How Did Internet Technologies Shake the Financial Industry?
Though the so-called fintech inventions have shaken the commerce and finance business, some believe that this will also pass. Like the Digi-coins of the 90s that captured investors, these new-age finance technology will fade away. However, as in investing, past performance does not determine its success. So how much has internet technology shaken up the financial industry? Please read on.
Customer Service
This may have taken the biggest hit from all the aspects that shaped banking and finance. In the past, one requirement of any business was talking to knowledgeable and trained staff to ensure a smooth transaction between the client and the institution.
Now, chatbots are taking the scene with predictive questions and answer, bringing faster solutions to people’s problems. Though there’s still a need for human interaction regarding complex circumstances, most consumers have preferred interacting with an AI. Giving customer service less about human interaction but more about providing people what they want at a much faster pace.
We are all also getting faster and faster internet as the technology advances. OFW’s in the US for example can get extremely advanced and fast connections at companies like Spectrum internet, which also offers free virus, hacker, and spam protection.
Online Banking and Lending
Banking and lending were traditionally done with someone presenting themselves. Withdrawing their money or providing all the requirements and identifications needed for the loan is the norm. Now, there’s no need to do that. Banks and finance brokers have gone with the flow and collaborated with IT specialists to create applications and better serve their clientele, as SalesKey puts it, finance brokers today should connect with clients using integrated VoIP phone, SMS, email, live chat, and video conferencing. These are all methods where human interaction is limited and often than not, eliminated.
Moreover, online banking gets more and more complex on a daily basis, and everyone prefers to buy goods and services online and pay their bills through applications on their phones. This is how technology has disrupted and transformed how we transact business with our banks and financial institutions.
Safety and Security
Even though the internet and its applications have made invaluable conveniences to man and industries alike, it also made them vulnerable to attacks by hackers, viruses, malware, and other entities that aim to hamper processes and wreak havoc to the system. This made banking and finance institutions shift some of their funds to provide iron-clad internet security for their systems and to safeguard their clients’ sensitive information.
Though the Cloud’s invention has made it easier for finance businesses to carry out the thousands of computations that they would have to do and share with other departments manually, the system is not as safe as it ought to be. They have found reprieve from VPN services, but still, it fails from time to time. This forces the finance industry to employ hardcore IT specialists and consultants just to safe keep their systems.
Fraud Detection
Before, detection and investigation is an equal effort for both human and machine. But technology has grown too much that even an IT whiz can only enter parameters and variables then leave all the rest to the computer algorithms to play their part. The machine can track the victim’s activity and calculate and predict the likelihood of fraud. This can all be done faster, which means that a large fraud team isn’t necessary. A handful of people can do the job which lessens job opportunities for so many individuals.
There are undoubtedly good and bad effects that internet technology has done on the finance industry. Some of them are predicted to stay. But what makes the finance institutions survive is the confidence and trust it builds with its consumers. After all, pen and paper are still the safest way of keeping sensitive details and information.
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