The Growing Impact of Fintech Companies

Financial technology is the new technology and innovation, which aim to counter traditional financial practices in the delivery of current financial services to consumers. However, it is also an evolving industry that makes use of advanced technology to enhance everyday activities in financial services at all levels. This industry is now a key player in shaping financial practices for financial markets and has become a significant force in global finance. It has therefore become imperative for financial firms to adopt some or the other financial technologies to improve their businesses.

A concrete definition of fintech can be defined as the following. Financial technology (also known as innovation in financial services) includes any new service or technology which complements or adds to the existing practices and procedures in financial services for the benefit of consumers. This is a relatively broad definition and may be divided further into several categories, for illustration, fintech in financial services or fintech focus or fintech planning. In terms of the second case, fintech planning refers to strategic planning undertaken in advance of investing in specific financial tools or services, such as tools for analytics and business process modeling. Strategic planning also requires the development of strategies for long-term goals and objectives of financial firms.

The focus of this article is on the second case of fintech. The financial services sector is highly fragmented and competing among multiple fintech companies. Challenges posed by the fragmentation can be reduced by adopting certain strategies for combining existing biotech companies with new ones, or by encouraging the growth of start-ups which are likely to become successful in the coming years.

The top priority of any financial institutions facing a future of increasing competition is to strengthen the back-end operation processes of its core products and services. The most important areas for rethinking include loan and credit management, accounts payable and receivable management, banking and billing, and customer service. While these processes remain the same across all industries, the speed of implementation and cost-effectiveness of back-end systems vary across them.

As part of their efforts to mitigate the impact of new disruptive technologies on their core businesses, traditional financial institutions should consider making strategic decisions that will reduce the risks posed by these emerging technologies. These include taking steps to improve the efficiency of their cash processing operations, and developing improved ways to provide customers faster and better customer support. To ensure that their efforts are not hamstrung by regulations that prohibit some types of transactions, banks should engage in research and experimentation with their current practices. They should also consider whether to retain or hire consultants to help with strategic planning.

In addition to improving their current service, banks should explore the option of attracting investment management professionals from outside the company to become an integral part of its investment management team. Investment management is difficult for small-to-medium sized banks because of the nature of the business. Therefore, these institutions need an investment management professional who is versed in working with larger banks to create an investment strategy that will take into consideration their unique characteristics. By doing so, these firms can ensure that their investment decisions are based on sound risk management principles. Furthermore, an investment management consultant can help these institutions become more cost effective. Fintech companies can also help by providing advice on how their existing processes can be improved to enable increased profitability.


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