There was a time when one would have to go to a bank for something as simple as opening a fixed deposit. And when it came to taking loans, there was a whole other exercise involved in that. Going to the bank meant taking time off work, standing in lines and trying to understand what was offered in a few minutes.
Fast forward to today; one can apply for a loan before finishing breakfast. What’s more, one can also compare offers from multiple banks/NBFCs in just minutes to choose the best one.
All of this has been made possible by fintech. The word ‘fintech’ stands for ‘financial technology’. It means the usage of technology that is used for providing financial services and products to the consumers. Non-banking financial companies like Finserv MARKETS and banks like Axis Bank, RBL Bank and others can offer products like credit cards, loans, insurance, investment, and more through the power of fintech.
Even though fintech is comparatively new, technology has been associated with finance for a long time now. To give an example, ATMs were, at one time, considered as cutting edge technology, and so were the signature verifying technologies that were first used by banks as early as in the 1860s. However, the widespread usage of the internet and smart devices like tablets, computers, smartphones has accelerated the growth of fintech in recent years.
Usage of Fintech
The use of fintech has changed the world of finance in different ways. That’s not all. Banks and NBFCs also offer various investment options that can be started within minutes from any part of the world. One can also link their bank account to their smartphone and keep a tab on the account 24*7. Moreover, there’s also a digital wallet facility now where a number of transactions can be made, be it a small amount or a larger one.
Not just banking but the insurance and investment sector is also evolving because of fintech. Telematics-based car insurance is provided now where the customers’ driving is monitored through the data collected from their smartphone or by fitting a black box in their car. How much they pay for their car insurance policy is determined using this data.
Apart from the transactions, getting finance related advice is also possible through fintech. NBFCs provide online assistance where one can reach out to the financier in case of any hurdles. That being said, the usage and evolution of fintech have paved the way for utmost convenience and a more personalised financial planning for individuals and organisations.
Let’s now understand the pros and cons of using fintech.
Pros of Fintech
Convenient and Time-Saving
Fintech products and services can be accessed and bought online. This saves the time and trouble of actually visiting the branch. Thanks to the internet and its widespread use, it is now quicker to access fintech products.
Wide Range of Products and Services
Consumers can now choose from a wide range of products and services. This is mainly because the access to various banks is remote, and regardless of the location, the choices are available online.
Fintech companies do not need to invest their capital in physical infrastructure like a banking branch network. Thus the cost is saved, and in return, the customers might be offered a cheaper deal.
The internet and technology have allowed fintech companies to gather and store more data about their customers. Therefore, more personalised services are offered to the customers based on the collected data.
Cons of Fintech
Lack of clarity on regulation
Fintech companies are comparatively newer than traditional banking or financial companies. The customer might be unaware of the applicable laws and how such companies are regulated. The customer might not know about their rights if anything goes wrong.
Financial products available on fintech companies can be bought within minutes. It is possible that a customer might not make an informed decision while purchasing such products and services. The technology and zero face-to-face interaction have made it easier for consumers to make rash decisions without properly knowing the product details.
Buying financial products using fintech might leave one exposed to various technology-based risks. The major risk of indulging in financial services online is that personal data could be misused, thereby making one fall prey to cybercrime.
Exclusion of Non-Tech-Savvy People
There are various products and services offered by fintech companies that are exclusively online. This means that one cannot avail them by actually visiting a branch. This leaves out many people who do not know how to use technologies and devices like smartphones, tablets, computers, etc. Being technologically challenged, they will be deprived of fintech services and products.
The bottom line about fintech companies is that they are surely a major player in the global economy and society. The massive reach of such companies shows that it is here to stay.
However, as customers, one should always be aware of the risks involved and ensure that the transactions are done carefully after getting proper information.