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It's the ever-changing world of finance where partnerships between banks and fintech act as strong catalysts for innovation. These are no longer only transforming the space but also adding to its accessibility, efficiency, and personalization. Numbers keep increasing for the partnerships until the present moment in the recent years as the statistics for collaboration show. From 2019 through 2021, the average number of fintech partnerships increased from 1.3 to 2.5 for banks with credit unions - the number jumped from 0.9 to 1.5-denoting really active expansions in the finance sector. There is a growing interest in financial institutions all across the world where this collaboration with fintech is concerned.
This medium proves to be a very fruitful ground for innovation. For example, fintech companies can adapt quickly to changes and find innovative solutions without the limits of legacy systems. Take a startup like Revolut or N26 as examples: they have changed banking to mobile services, offering interfaces that are flexible and instant payments via mobile apps. It has become surprisingly possible to enjoy worldly financial services without paying the high charges of conventional banks. Financial institutions bring additional stability and trust to operate such innovations at scale, with the infrastructure that these banks would have in place-an access point to many more customers in regions where traditional banks cannot serve the demand for such services.
There was a period when all banks considered fintech start-ups as rivals, but today, the scene has changed with the magic of doing business with each other for inventiveness, efficiency, and customer service. Technologies offered by fintech companies allow banks to broaden the scope of services, thus retaining the customers amid rapid changes.Fintech partnerships between banks and fintech companies offer several advantages that help maintain competitiveness and enhance the customer experience:
Such partnerships allow banks to diversify more for existing customers and even acquire new clients through wider offerings and better efficiencies in the service.
The innovations of financial technology have completely and drastically changed traditional banking services and have consequently made it necessary for traditional institutions to adapt to modernity. The fast evolution of technologies such as mobile banking, digital wallets, blockchain, and artificial intelligence over a period of more than ten years has changed the entire landscape of financial services. Today, customers want fast, efficient, personalized banking services that demand both internal and external actors to change how services are managed and delivered, making banks develop strategies around digital technologies.
With such changes in the environment, traditional banks are becoming more and more customer-centric in their approach with use of data analysis and artificial intelligence capabilities built into bank operations. It has been shown by research conducted by Edgedelta that the improvements resulting from business analytic application on banking processes can cut operational costs by up to 80%. Banks have also developed the scope of services with additional online banking and digital payment systems through mobile applications. Banks are adding cloud and automation technologies as methods of increasing operational efficiencies and streamlining processes for more effective services.
Shaking off such disadvantages of pricing will surely make them unfit to compete in the world's emerging business environment. Traditional banks will have to innovate and develop ways synonymous with the highly reputed fintech competition companies, known for low-rate charges, very innovative models, and convenience. Most banks have started tying up in strategic partnerships with fintechs, allowing them to utilize very advanced technologies without costly and hefty in-house development costs. From such joint ventures, banks can enjoy all the flexibility and innovation that the fintech entails while retaining the stability and trust that come with traditional banking.
In the post-pandemic era, banks increasingly find themselves having to transform according to the changed circumstances where digitization and inclusion become the main driving force in seeking more solutions for all populations. The need for collaboration between banks and fintech has therefore become increasingly vital from the point of view of providing financial access, thereby opening up new markets and serving people that have not been reached by traditional financial institutions.
Some major points on financial inclusion can be mentioned as follows:
Broadens the provision of services and banking services for unconnected groups
Finance services for the poor and for those living in rural and remote areas are provided through the partnership of the fintech with banks. The provision of such services is usually through mobile platforms for carrying out financial transactions without the requirement of a physical bank.
Mobile banking solutions to improve financial literacy
Instead of regular payday loans, fintechs can offer alternative borrowings that ensure not paying very high rates of interest. For example, they may offer the option of getting earned wages not having to wait until the end of the month for payment.
Mobile banking programs meant to enhance economic literacy
Investment in educating the users is a must for securing such long-term health features. And for this reason, one can rely on mobile application or platform watching the behavioral changes the residents go through in making use of financial products or services from that which was available earlier to different classes.
Development of digital currencies and blockchain technologies
New financial products that are available to those without access to traditional banking services can particularly benefit from the cross-border payments and the new potentials opened up by blockchain and digital currency technology in financial inclusion.
Embedding financial technologies for security
Reliably accessible financial solutions are however also creating safer channels for the use of such facilities by different people. For this reason, trust must be built through the provision of transparency and compatibility between bank and fintech platforms.
New doors are opening into the inclusive financial ecosystem with innovative financial solutions, banks, and fintech companies. Partnerships between traditional financial institutions and both innovative technology companies will not only expand access to financial services but also help enrich the quality of life for millions of people left out of the more advanced traditional financial system. Efficiently utilizing these solutions would mean sustainable growth for banks in new markets and maximum financial stability to all social groups. All of the afore-mentioned makes this partnership a critical component of forward-looking strategy.
Indeed, current trends guide most of such domains-integration into that of more advanced technology, which includes AI and ML. This would mean that financial institutions not only automate but also personalize services according to requirements of each customer. AI-focused forecasting of financial tendencies will assist consumers in taking wiser decisions on savings and investments.
We consider it possible that the use of digital currencies and blockchain technologies will rise in the next few years, thus improving the processes of financial transactions. Such a way might generate opportunities for the building of speedier and less costly transaction processing in real time and open access to finance for people not previously able to use conventional banking products.
With more and more mobile technology development, we envisage a scenario in the future where branches would be reduced because banks would put their focus on mobile platforms and digital wallets. Financial services would be made more convenient and available to clients, who would not patronize physical banks for services but would instead enjoy the same conveniences electronically.
In Lab42, there are trends observed, and we always put much effort into the enhancement and perfection of modern fintech products with future trends and breakthrough technologies. We do believe that the development of financial technologies has a strong influence on the quality in which the service is provided to clients. This is the reason why we have been implementing modern solutions that lead our users into a world of convenience, security as well as fast and latest financial services, based on industry standards.
Visit our website for current developments regarding changes in the fintech sector and other terrains of business. Be in the midst of change with us!
