The promise of FinTech in a disrupted financial sector

Just like every other industry, technology is bringing fundamental changes to the financial services sector as well. With the help of next-gen, emerging technologies, we are looking at a future with faster, smarter, and efficient financial services that are highly customer-oriented. Statistics say that most customers switch banks as a result of a poor experience or an unsatisfactory digital transaction. This emphasizes the importance of digital adoption for the financial services organizations worldwide. From card-based payments and online banking to digital wealth management and zero-touch payments, FinTech is advancing and making progress on the digital curve rapidly.  

The virus that we are dealing with has brought in a new perspective for all the things in our lives. Earlier, the traditional financial institutions were competing with the novel FinTech companies for market position, whereas now they both are looking to leverage each other’s strengths to expand their own capabilities. New partnerships are forming as traditional and modern financial services providers join hands for offering a unified service to their customers. After all, the ability to deliver great customer experience is the only factor that will help them strengthen their position in the long run, while enabling them to minimize the implications of the economic slowdown.  

There was a time when the Financial Services sector was being disrupted by the introduction of FinTech in the market. In the light of current events, the industry is now experiencing a total shift as FinTech becomes its savior. People are now wary of performing cash or card-based transactions as they involve the risk of virus transmission. As almost all the banks have shut down most of their branches and are now operating remotely and digitally, FinTech is gaining prominence.  

The state of the payments economics 

Given the uncertainty on everything, there is little that can be predicted with absolute confidence. By looking at the economic conditions, analysts are predicting a negative revenue growth this year and contraction in the global GDP if the pandemic is not controlled faster. However, having said that, this situation is also presenting promising opportunities to the BFSI industry for establishing trust among their customers while expanding their services to the untapped areas.  

In their recent article, McKinsey said, “Quarterly GDP in the second quarter of 2020 could decline by as much as 35 to 40 percent—and the payments industry’s financial outlook reflects that uncertainty in the short term. But the industry’s stability will play an invaluable role in rebooting the global economy, and the potential for innovation can support functioning economies as a “new normal” emerges.” This means that the financial services providers should accelerate their digital adoption and start looking for opportunities to leverage the advanced & innovative Financial Technology. 

Supporting the survival of financial services sector 

Standing in the queues in a brick-and-mortar bank branch was never convenient. Now, it is unsafe too. Not only are the emerging technologies making the lives of BFSI customers smoother and easier, they are also empowering them to perform necessary transactions at the comfort and safety of their homes. Digitally-strengthened platforms are preventing the disruption in the cash flow, thus significantly minimizing the scale of impact of the pandemic. 

As per a recent report, 68% of the consumers use services from FinTech players as they seek ease of use, 70% of them are attracted by their low-cost offerings, 54% want faster services, while 39% of the users want personalized products and better features. The major strengths of these FinTech organizations are their mobile-only model, a customer-centric design, scaled agile approach, and data-driven insights. Combined with the right set of tech stack and years of experience of the traditional financial institutions, they can lead the market with their innovative products by providing a complete in-and-out digital experience. 

Let us talk about some of the areas where FinTech is showing immense potential and where an incumbent-disruptor partnership will result in overall enriched experience for the customers. 

1. Smart finance & wealth management: Data analytics being the biggest fuel for the FinTech companies enable them to offer smart, personalized investment advisory to their customers. With the help of visual graphs and statistics, these wealth management platforms and applications allow the users to keep a close check on their expenditure and have better control of their money. There are AI-driven robo advisors that leverage data and smart algorithms to manage the investment portfolio of the users. Some of the more advanced FinTech providers are also employing these AI algorithms to offer future market predictions and alternate investment options based on a user’s profile and goals. 
2. Mobile-based payments and phone banking: Platforms such as Mobile Pay, Apple Pay, and Google Pay are allowing users to make cashless purchases through their smartphone applications. Such zero-touch payment technology has become critical for the population battling a highly-contagious virus. Mobile banking or net banking is much more than a miniature phone-version of a bank. These applications take away the need for a user to physically visit a bank branch for any of their banking needs. With the mobile banking platforms, the customers can perform an array of activities from obtaining the bank statement to transferring their account from one branch to another. 
3. E-invoicing: In addition to simplifying the lives of the customers, digital transformation of the financial services sector is aimed at minimizing paper-driven processes and achieving high speed at greater scale. E-invoicing solutions integrated with the ERP-based applications are facilitating faster and efficient processes for the Business to Business as well as Business to Customer organizations. As most of these applications are cloud-based, they also offer greater flexibility and effectiveness to the firms, while reducing the costs significantly. 

To sum up 

“Banking has to work when and where you need it. The best advice and the best service in financial services happens in real-time and is based on customer behavior, using principles of Big Data, mobility and gamification”, says Brett King, a global influencer in Financial Services and a futurist entrepreneur. For banking to work when and where the customers need it, simply adopting the digital platforms and solutions is not enough. The fiercely challenging and competitive market and uncertain market shifts make it necessary to embrace the next-gen technologies. However, it is also critical that these FinTech solutions work as intended, that the users do not face any functionality or performance glitches, that the advanced features deliver the expected outcomes. For ensuring this, the FinTech providers must not overlook the importance of software testing in financial services. By performing end-to-end testing of their platforms and applications, they can ensure that all their processes, features, and functionalities across front, middle, and back-office perform seamlessly. 

Cigniti’s Financial domain competency group (DCG) has in-depth experience in testing Fintech applications covering the spectrum of Capital Markets, sophisticated Order Management Systems interlaced with Smart Order Routers, and intricate Execution Management Systems. Schedule a discussion with us today. Our dedicated FinTech DCG concentrates on testing complex real-time applications while our capital market initiatives are led by domain and technology experts, backed by a team of high-caliber professionals. Schedule a discussion with us today.