Banking has gone through many evolutions over the past few decades. Every generation seems to be marked by a different evolution in the banking industry, and for the Gen Z and millennial markets, that evolution is fintech.
Fintech is an umbrella term referring to all of the different software tools and applications used by the financial industry to digitize aspects of the banking industry. This includes online banking, embedded finance, regulation/compliance tech, back-end lending tools, and underwriting automation software.
The evolution of fintech for banks happened fairly quickly, but there were some pretty clear reasons for its rise. So to help lenders, techies, and journalists understand why and how fintech came to be what it is today, we are going to answer a few questions, including:
- What led to the rise of fintech?
- How important is fintech for modern banks?
- How can banks adopt fintech?
What Led to the Rise of Fintech
A number of market factors led to the rise of fintech for banks. Many will say it was simply the technological developments of the time, but it goes a bit deeper than that. The rise of fintech can be largely attributed to one prominent change—market globalization.
The globalization of the market had the following influences:
- Wider customer bases
- More competition
- Better consumer information
- Improved communication
- Better market data and analytics
The internet made it possible for businesses to offer their products and services to a global market, which meant far more opportunities for sales departments, but also a lot more competition from which they needed to set them themselves apart. This dependence on the internet to compete in the global market led to higher demand for companies that knew how to create tools that leveraged the internet and computer tech.
Fintech tools that spawned to assist with the internet’s globalization of the market started with simpler things like online payments and shipping but evolved to provide even better consumer-facing solutions like application programming interface (API) integrations that allow services like financing and shipping from one provider to be utilized on a third-party online store. This is what makes it possible for a consumer to purchase something from a merchant, finance that purchase with a lender, and get it delivered by a logistics company, all from a single checkout screen.
Fintech for banks also evolved to handle back-end functions to make banking more efficient. These include things like banking CRM software, automated underwriting tools, and record digitization to make storing important documents easier and more secure. Even regulation compliance software exists that helps banks keep up with ever-changing regulations.
How Important Is Fintech for Banks?
65% of consumers have used digital banking services.
Most US consumers expect that their banks will offer digital banking, one of the country’s most popular fintech services.
The global fintech industry has nearly doubled in value since 2017.
Even within the past five years, fintech has seen massive growth in utilization and profitability.
A more specific version of the stat above further proves just how disruptive fintech has been in the banking industry.
North America is responsible for more than half of all fintech venture capital funding.
Banks competing primarily in North American markets will almost certainly fall behind the competition if they do not adopt fintech, as the market is saturated with firms that already have.
US personal loan agreements using fintech have increased by 33%.
Banks looking to adopt digital lending specifically will be happy to know that its adoption rates are only going up.
Adopt Fintech for Banks With Skeps
Skeps offers a comprehensive, end-to-end consumer financing platform that helps businesses modernize their entire payment process. Working with an entire network of established lenders, we go above and beyond one-click payment, also offering a one-click application process for several different types of consumer financing, including:
- Installment financing payment plans
- Store credit cards
- Consumer loans and leases
If you’re looking to partner with a forward-thinking fintech company that will get your financial products in front of as many consumers as possible, Skeps is the perfect fit.