As anyone with an interest in financial technology has noticed, fintech products are more than just a passing fad—they continue to grow in popularity, year after year. Some of fintech’s success can be easily explained. For instance, customers are attracted to convenient fintech alternatives to traditional financial services, which can be confusing and time consuming.
However, that doesn’t fully capture precisely why the industry has been so successful in recent years. To better understand exactly why fintech remains appealing, consider the following reasons.
It’s worth addressing certain practical realities when exploring the success of startups in this industry. For instance, many experts correlate the success of fintech with that of smartphones. Many fintech products are accessible via smartphone, and as smartphone ownership continues to rise throughout the world, so, too, does fintech success.
This fact alone does not entirely explain why fintech is so successful, but it does show that increased access to these products and services is responsible for the fintech revolution to at least some degree.
Access for the Unbanked and Underbanked
Fintech products often provide unbanked and underbanked people with access to financial services and opportunities that have been historically unavailable to them.
For example, people who live in rural areas may be underbanked because it’s difficult for them to get to a traditional brick-and-mortar bank. However, if they have access to a fintech service that allows them to complete all of their banking tasks via phone, it’s much easier to become—and remain—a customer.
This is why it’s a good idea for traditional financial institutions to partner with fintech companies. Traditional banks can help startups navigate the applicable regulations, while startups can help banks serve a customer base they didn’t previously have access to. Everyone involved, including startups, banks, and users, would benefit from such an arrangement.
In recent years, consumers have increasingly expressed a desire for personalized service from companies. This is likely due to the rise of AI and machine learning. With AI programs, businesses have developed the ability to learn more about each individual customer, tailoring their services accordingly.
It makes sense that fintech companies employ AI as well. After all, they specialize in leveraging the latest tech innovations to improve upon existing financial services and products. By using AI to explore the identities of customers, fintech startups are able to offer a degree of personalization that traditional banks and firms have been slow to match.
It’s not fair to say that traditional banks unilaterally refuse to adjust their services according to changing customer demands and expectations. Plenty of banks have understood that to remain competitive they have to substantially overhaul how they serve their customers.
However, these changes have been slow to come, giving fintech startups the advantage. They aren’t married to old methods and approaches. Their goal is to provide their customers with the most intuitive and convenient solutions from the get-go. Fintech products and services, in contrast to traditional banking institutions, are made to respond to customer expectations quickly, efficiently, and smoothly.
Though fintech companies can benefit from partnering with traditional banks, which often provide customers with a wider range of services than the fintech startups can offer, there is value in simplicity.
Many successful fintech startups have very simple goals. Their founders set out to solve only one or two basic problems, allowing them to focus on developing the strongest possible solutions. Instead of spreading their resources thin trying to offer more services than they realistically can, they work on being the best at just one. Sometimes that’s more effective than trying to be the one-stop-shop for all of a customer’s financial needs. Additionally, because they aren’t dragged down by legacy IT issues or outdated business software, they can use the right tools to achieve their specific goals from the start.
Of course, these examples don’t represent every single reason why the fintech revolution shows no signs of stopping. This is a complicated topic. That said, they do manage to shed more light on just why fintech isn’t going away anytime soon.