Anyone with even a casual interest in the subject knows that fintech products continue to rise in popularity. This is primarily due to the value fintech products offer. They simplify financial tasks many consumers already need to perform throughout their daily lives.
It makes sense that consumers are embracing more convenient options. There’s no reason to spend time going to the bank when you can do your banking via an app.
However, while that is a major factor contributing to fintech’s growth, it’s by no means the only factor. The following are a few other reasons fintech companies continue to thrive:
A Focus on the Underserved
Fintechs don’t just offer convenient alternatives to traditional financial services solely to those who already take advantage of these services. Fintechs have also served the unbanked and underbanked to a much greater degree than traditional financial institutions.
There are many reasons this is the case. Sometimes, geography is a key factor. A person who lives in a area with few bank branches won’t be able to easily take advantage of the services a bank offers. That’s of course not a problem when they can use their phone to access these services.
This is one of the essential factors driving the rise of fintech. Fintechs tap into markets that traditional financial institutions have overlooked or ignored in the past.
Serving the Young
People from all generations use fintech products and services. That said, younger people use them more commonly.
It’s easy to understand why. First, young people tend to be more comfortable with new technology. They also expect a degree of convenience that new technology can provide. Young people who are accustomed to the convenience of the digital age aren’t eager to use outdated financial services. They want options that offer speed and ease.
This is another major reason fintech’s popularity has risen very quickly in recent years. Fintech products serve today’s emerging market. Banks and similar financial institutions need to adapt accordingly in order to stay relevant and maintain a customer base.
Increased Smartphone Usage
Although this might seem like a minor point, it’s worth noting that statistics indicate smartphone and mobile device ownership throughout the world is rising quickly. This means more and more people have the tools necessary to use fintech products. This suggests fintechs will continue to grow in popularity as smartphones become even more ubiquitous.
It’s extremely important for fintech companies to prioritize security when developing their products. Customers need to feel they can trust a company to keep their sensitive financial information safe from hackers and similar threats.
That said, experts also point out that a lack of trust in traditional financial institutions has contributed to fintech’s growth. In the wake of the global financial crisis, surveys indicate consumers are skeptical of the traditional banking industry. They’re turning to alternatives instead.
It’s important to understand that some fintech researchers believe the future of the industry will involve greater consolidation. Companies may merge to offer a wide range of financial services. However, up until now, most successful fintech companies have primarily focused on offering one core service, along with potential variations on it.
This focus ensures they deliver an effective product. By not stretching their bandwidth, they can devote their attention to perfecting one service, instead of offering multiple weaker services.
This also reduces their initial operating costs. Offering one service doesn’t typically require a huge team. This helps fintechs save money, which naturally helps them grow more quickly than cumbersome businesses with many employees and departments.
Lower Costs (Again)
Along with reducing their own costs by focusing on one service, fintech companies also offer reduced costs to many of their customers. Research indicates that fintech adoption tends to be particularly common in parts of the world where financial services are relatively expensive. Consumers embrace them not only for the convenience they offer, but for the savings as well.
Fintechs can offer lower costs when compared to traditional financial institutions because their overhead costs are often lower. Unlike banks, which need to spend money on brick-and-mortar locations, fintechs provide their services entirely in the digital realm.
Competition is another major factor influencing fintech costs. In some parts of the world where fintech’s popularity is growing rapidly, there is little competition among banks. That’s not the case in the fintech industry. Fintechs need to keep costs low in order to compete with one another.
What’s perhaps most important to keep in mind is that these factors aren’t changing. That means fintech’s growth won’t slow down any time soon. Quite the opposite.