finance term paper writing

finance term paper writing

The Impact of Financial Technology on the Banking Industry

1. Introduction

We all know that the modern world is becoming more and more “digital.” While traditional banking systems are still being used by many, the development of financial technology has introduced a different method of banking. Over the past few years, the financial technology industry has increasingly grown and transformed the way financial systems work – from how we pay for goods and services to how we manage our finances. This development has had a great impact on the banking industry – changing the way we bank and the way banks operate. The purpose of this research article is to take a firm on the impact of financial technology in the banking sector. In the first instance, the article provides an insight into what financial technology is and when it was first introduced. Secondly, the article will briefly describe the different types of financial technology. In answering these questions, the article aims to provide the reader with a well understanding of what financial technology is and its various forms before approaching the multi-dimensional aspects of it. Then, the evolution of financial technology over the years will be explained and the significance of financial technology in the banking sector today. Further, the article will move into exploring the benefits, challenges, and success story of financial technology in the banking sector in the later part of the article. By looking into both advantages and drawbacks, the article will provide an in-depth insight into the multi-dimensional impact of financial technology in the banking sector. This research article is structured in a way that will shed light progressively to the reader to a better understanding of the impact of financial technology on the banking sector.

2. Evolution of Financial Technology

The development of banking and financial practices has always been linked to changes in technology. In prehistoric times, our ancestors exchanged items like food and weapons. As society evolved, so did our method of exchange and currency. From metal currency to paper money, financial technology became more evolved. The 20th century saw the first real evolution of financial technology through the use of electronic machines to settle transactions. For example, the first Automated Teller Machines (ATM) were introduced in the 1960s. These existed alongside traditional banking methods. It was only when online banking was introduced that we saw a real shift in the use of technology to make day-to-day banking that much more attractive to consumers. The start of Internet banking and telephone banking in the mid-late 20th century introduced a new method of banking outside the traditional bank building. By 2014, for the first time, more online banking accounts were opened rather than in-branch accounts all over the world. This led to competition of non-banking firms to offer new services. We have seen noticeable financial technology growth in startup firms. These businesses look to offer quick, easy, and accessible services to the general public which the current large high street banks may not offer. These small firms offer an app-based service that is easy to download and simple to sign up. These apps use Artificial Intelligence to offer instant financial advice and round-ups on digital spare change jar services. Such technology is helping consumers to manage their money in an easier way, and it means that transactions can be very quick and easy. This is only a rather recent example of how financial technology has evolved and continues to do so today. As discussed earlier in the essay, the most recent and influential era of development in financial technology is the introduction of Blockchain. Although to date it’s mainly known as the digital ledger for managing cryptocurrency, it can be used in many other financial transactions and records, such as contract management or health records. It’s the backbone technology of the digital currency bitcoin. Bitcoin transactions utilize blockchain technology for its security and reliability, which further encourages the growth and spread of both the currency and its technological advance. I believe the focus of research into blockchain will only increase, as governments, large banks, and current financial technology firms are starting to test it out.

3. Benefits and Challenges of Financial Technology in Banking

For example, a bank can use big data and analytics to work out in real time the sort of interest rates that should be offered on certain financial products to ensure that they are competitive and attractive to potential customers. This is because a big data system, crawling through masses of data including current market indexes and indicators, can produce a meaningful picture of what rates competing banks are offering, and link this to the latest research and opinions from key financial experts from around the world. In turn, the bank can ensure that, minute by minute, their products are optimally priced and that the chances of success at gaining customers’ custom are maximized.

On the other hand, incorporating new financial technologies into a bank’s operations can also make things more efficient for the bank itself, and for the bankers working there. For example, the adoption of big data analytical techniques and tools allows banks to move away from more traditional, manual processing and paperwork and towards more automation and digitization. This is because big data software and analytics engines have the ability to process and ‘derive’ knowledge from extremely large and diverse data sets, far beyond the capacity of a human database administrator or managing a standard, fixed-sized banking database. This means that a bank can use the same number of staff to carry out much larger and more complex data analysis exercises than before, and make quicker and more informed business decisions as a result.

The simplest explanation for the benefits of financial technology in the banking sector is that it makes things easier and more efficient for customers. For example, the advent of online and mobile banking systems, powered by modern software and technology, means that customers no longer have to visit a branch during working hours to make a deposit on their account or to transfer money between different accounts. Now, one can carry out these operations at any time of the day and almost anywhere in the world. This is game-changing for the modern, fast-paced world where people are increasingly busy and value convenience and efficiency over anything else.

4. Case Studies: Successful Implementation of Financial Technology in Banks

The first case study to explore is the mBank in Poland which is the first mobile and online bank in the world that has integrated several new technologies to create one of the best user experiences when it comes to digital banking. One of the main successes of mBank is that the bank focuses on making the customer journey easier in all aspects of day to day banking. The main way that they have achieved this is through the use of financial technology such as big data and analytics to create a more personalised customer experience. For example, when you log onto the banking page online, powered by the well-known company SAP, there is the main dashboard page which shows an overview of the accounts and transactions. However, each view on the page can be customised; you can choose what type of transaction and what period of time you want to see, as well as swap certain sections to more preferable places on the page. This customised view is something that mBank has promoted widely and is claimed to be the technology that convinced the users most considering the number of satisfied votes. Also, mBank has used mobile technology to bring benefits to different aspects of the business. A representative of mBank suggests that the use of mobile technology is a fundamental element considering the future development of mBank. On the one hand, mobile technology has helped the productivity of financial advisers in mBank by creating an even more efficient and time-saving advice giving process. This is done through the development of a mobile application that can prepare all the advised information just by filling in a few blanks on the app. However, the most important aspect of the mobile technology success has been the development of an app for potential customers when it comes to obtaining a credit. It has allowed the whole application process to be done on the screen and customers are promised to receive a credit in just a few minutes. This is a great example of how the use of modern mobile technology is able to bring an innovative step change in the efficiency of service and also a competitive edge in the digital age of financial business. As a matter of fact, within the first month of launching the app, over fifty thousand people had already used the mobile application and over eight thousand transactions were made through the app. The success of financial technology in mBank is characterised by the iterative process of identifying suitable technology, aligning the technology with business strategy and being customer focused. Such process is called digital strategy and involves continuously steering the technology in order to fulfil the bank’s goals. Every year at mBank, the management would decide to update a particular area of focus in the upcoming years while adopting the philosophy of small, iterative steps and small frequent investments. Successes are celebrated such as high level of customer satisfaction which stems from technology adoptions and it has become a cycle that learning from changes has driven the strategy so that the business will be continuously developed. The impact of digitalisation in mBank is substantial to the success of the bank; in fact, the bank has experienced remarkable achievements such as winning the prestigious title of the Best Digital Bank in Poland for four years in a row and also was awarded as the Most Innovative Digital Bank in the World so it is not just limited to nationwide success. All of the above awards can be considered as a consequence of continuous improvements with the approach of applying financial technology and satisfaction of clients has validated the effectiveness.

5. Conclusion

The future of the financial industry is evolving. Technology is advancing, creating new and innovative ways for banks to serve individuals faster and more efficiently than ever. In this paper, we discussed the history of financial technology and how it has evolved over the years to benefit the banking industry. The benefits of financial technology for banks today are clear, including automating processes to reduce costs, creating smoother and more user-friendly experiences for customers through technology such as mobile banking and online lending, and helping banks to better understand their consumers through the collection of data. However, financial technology hasn’t come without its challenges; concerns over privacy and data protection, the costs of implementing new technology and risks such as system failures that could paralyze a bank have always been key obstacles. Nevertheless, with careful and considered implementation, as we saw from the case of Bank of America, the use of predictive technology and big data in banking can bring a fundamental, positive change to the landscape. Importantly, it benefits not only the bank in terms of streamlining operations, but also, as the example shows, it can maximize huge benefits to consumers of all kind by improving and tailoring personal financial options. The shift to focused, digitally led personal financial advice continues to remove the influence exerted by large lenders who provide blanket financial products and removes the barrier for entry to smaller, more dedicated institutions who truly understand and help tailor to user’s habits and requirements. All this leads to a more engaging and appealing market for everyone. From the research conducted and the real working examples of Barclays and Bank of America, I can conclude that the financial technology has a huge impact on the banking sector and it’s here to stay. The advantages are manifold, from lower costs and increased efficiency to better risk management and more satisfied customers. Banks and financial institutions that are able to successfully adapt and take advantage of these changes will have every chance of success in the future. But, as with all change and development, there will be winners and losers and a significantly shifted landscape in which financial organizations operate.