Before getting knowledge about fintech vs banks, we must know about the modern banking systems, which are basically an evolved form of the loan system of ancient times. In ancient times, the loan and banking system was not like in modern times. There were so many fallacies and flaws that the system was off guard most of the time.
But nowadays, technology is developing day by day, and new innovation in the banking changes the old scenario and hassle. Also, new banking systems are introduced to people other than the traditional banks. Even most of today’s banks are backed by Fintech and its product. In some cases, Fintech acts as a disruption in the whole banking system.
In this article, we are going to discuss Fintech vs banks, more precisely, the differences between Fintech and traditional banking systems and how Fintech is reshaping the banking system. So keep reading.
What is Fintech?
Modern financial technology is also referred to as Fintech nowadays. The main motive of this technology is that it always tries to improve and automate every financial transaction or any kind of service. It has its own algorithm that helps the users of mobile and computer to access their banking services through their phone.
Other than these, it also helps the users to manage their financial operations, process, and so on. Especially the business owners and companies are more benefited by this technology. Now, it becomes so easier for companies to manage their financial operations. In addition, Fintech also works with the development of cryptocurrencies.
Benefits of Fintech
Nowadays, Fintech is focusing its services more on consumer-based services. These services may include investment management, retail banking, educational purposes, and so on.
The main advantage of Fintech is, you can access and manage everything from your smartphones or computer.
That is why you do not require to use many kinds of old methods of checkbook writing or anything related to this. It is also creating many opportunities for its consumers. And day by day, they are getting more and more digitalized. Some other benefits may include:
- Digital access (i.e. Smartphone app). Internet users can easily send and receive money from the digital platform
- Apps for budgets and distribution
- Digitalized currency system and cryptocurrencies
- Open banking
- The easy and smart contract between the sellers and customers
What are Traditional Banks?
Usually, traditional banks, by default, mean a financial institute where you can deposit your money, make loans, and also can get any other financial services. However, there are so many types of banks according to their services. For example, corporate banks, investment banks, retail banks, etc.
Most of the time, these banks have to work under the central bank that is governed by the national government. In the economics of a country, the role of banking systems or banks is really inevitable. Generally, traditional banks help their consumers in regular transactions such as money deposits, withdrawal.
Traditional banks also provide loans, currency exchange, safe deposit locker, and so on. No matter traditional banks or Fintech financial service, both works for their consumer and try to provide seamless financial services.
Fintechs vs Traditional Banks: Differences
Despite having some similarities, there are also some differences between Fintech and traditional banks. Both systems work for providing their consumers’ hassle-free services. Then again some differences between these two are given in the following:
Definition
Fintech financial facilities refer to the modern world financial service that uses modern technologies in their service. Most of their services are digitalized and regulated automatically by the software.
On the contrary, the traditional banking system works with physical money deposits, withdrawal, and loans.
Purpose
The main purpose of Fintech is; they always try to provide seamless customer service. They also focus on their consumer’s convenience, functionality, and accessibilities. On the other hand, traditional banks focus on the security of all financial risks and management.
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Service Coverage
Fintech is more technologically advanced; that is why they mainly use the digital platform in order to provide their services. Those platforms may include the smartphone, smart device, and so on. It also has a very vast market distribution. On the other hand, traditional banks work with limited market distribution.
Structure
Fintech is always working with new innovations, and they are developing their services day by day. On the contrary, the traditional bank does not have anything new to deal with. They always follow a certain procedure in order to provide their services.
Technological Reliance and the Customers
As we have known that Fintech is more digitalized and they always have to rely on modern technologies. On the other hand, traditional banks do not have to deal with that many digital technologies. The target customer of Fintech is not limited, and they work with huge customers. And traditional banks always focus on their target customers.
Fintech vs Banks: How FinTech is Reshaping Banking
We are living in a world where everything is now technology-based. Even nowadays, the banking system is also becoming very dependent on digital technologies. Over time and development, financial institutes are also developed their system on the technological innovation that is also known as Fintech.
Fintech is playing a very vital role in order to reshape the banking system. Because financial technologies are becoming more and more popular nowadays, the consumers of the bank also want to have a hassle-free, convenient and easy service. That is why most of them choose to have Fintech for their financial transaction.
There are so many reasons why people are more prone to digital financial technologies. The main reason is that it changes the whole scenario of financial experiences. The users can work with foreign currency (i.e., cryptocurrency). It provides the B2B facilities and solutions. Other than these, it also improves the use of customer data.
The Bottom Line
Nowadays, people are creating a good brand image and differentiate themselves from others just by using Fintech. Because Fintech helps its consumers to create a very favorable business environment, it always helps its users to stay ahead of the competition of modern technologies.
Likewise, it is shaping out the traditional banking system with its modern technologies. However, the importance of traditional banks is still mentioned worthy. Because they always focus on the security and the management of financial services. Therefore, you cannot say one is best, and another is not in the argument of Fintech vs banks.
Hopefully, this article helped you to understand the fundamental differences between Fintech and traditional banks.