New payment solutions in the realm of financial technology are becoming increasingly important for internet businesses as their use grows. They do not render the use of more conventional forms of exchange obsolete. Most companies still process customer payments via traditional methods like credit/debit cards, bank transfers, checks, cash, and physical point-of-sale (POS) terminals.
Rather than having to choose between traditional and digital payment methods, businesses should strike a happy medium where both may coexist to serve all their customers’ needs. Fintech, or “financial technology,” is a rapidly growing sector that combines traditional banking with digital tools to improve the way consumers and businesses handle their money. Will it last all the time?
This article will therefore go into detail on fintech, the differences between fintech and traditional banks, and the expanding potential of financial technologies.
What is FinTech?
The term “FinTech,” a combination of “financial” and “technology,” refers to innovative tools for the delivery of financial services and products via increased automation and leverage. Fintech is a term that refers to the use of information and communication technologies in the financial sector to help individuals, businesses, and governments manage financial transactions and related commercial activities.
PCs, cellphones, and tablets are common entry points for utilizing technology. The introduction of the Internet and the rise of e-commerce in the 2000s signaled the start of the modern era of financial technology. Banking solutions in the twenty-first century are becoming more digitalized as a result of the use of technology in financial institutions’ back-end systems.
Since then, fintech has shifted its focus to serving ordinary people. It is used in retail banking, investment management, fundraising, the nonprofit sector, academia, and providing individual financial aid. Bitcoin and other digital currencies are also essential components of the financial industry.
What are Traditional Banks?
Regular banks are permitted to accept deposits from a large number of customers and to lend money to both individuals and businesses.
Furthermore, some banks, such as corporate, investment, and retail banks, offer beneficial monetary services. Such regulations are typically imposed by a country’s national government or central bank.
Popular Traditional and FinTech Payments
The introduction of digital technology promises to cause dramatic changes in the banking system. How exactly do you intend to accomplish this? National banks and brick-and-mortar retailers are shifting their focus to the client in order to adapt to the ongoing digitization threat. In the banking industry, there is a lot of competition and new competitors, making it difficult for traditional banks to thrive.
In this piece, we wanted to emphasize that the financial ecosystem is not limited to a single industry. This means that the most widely used digital payment methods created by fintech are:
1. Invisible Payment
Invisible payments are a type of payment that does not require the exchange of money or the use of a credit card. This type of payment acceptance is now possible thanks to advances in banking technology such as speech recognition, QR codes, and face biometrics. These methods were pioneered in Asia, specifically by AliPay and Tencent.
2. Digital Wallet (eWallet)
These electronic replacements for conventional wallets store payment information like credit card details to facilitate purchases made with a user’s smartphone, tablet, or computer. This form of payment has recently become popular in a number of nations, such as Argentina and the UK.
3. P2P (Peer to Peer) transfer
Electronic money transactions between individuals conducted online are considered peer-to-peer transfers for the purposes of this definition. Connecting a card or bank account to a mobile app is one way to accomplish these tasks. It’s a simple and quick way to reach potential new clients.
4. Tokenized Card Payment
It is a digitalized, up-to-date form of card payments that facilitates PCI Data Security Standard (PSD2) compliance and offers security, simplicity, trust, and anti-theft metrics. It safeguards the PAN by encrypting it and issuing a token in its place, which is virtually indistinguishable from the original.
Wearable technologies are miniature gadgets that the user can always keep with them. Wristwatches, for instance, can be upgraded to smartwatches or activity bracelets that support contactless payments. They function similarly to a contactless card in that they can be used at any point of sale terminal.
6. Mobile Payments
Money is transferred from one party to another via a mobile device. Payment-specific smartphone apps have proliferated over the years, speeding up processing and boosting safety indicators in the process. This kind of payment has found great success in Spain and other European countries, and Latin American countries like Colombia. FinTech is also being used in several WooCommerce add-ons and WordPress plugins, such as WP EasyPay, a Square Payment Plugin for WordPress that streamlines the payment process for customers.
In addition to a potentially larger customer base and faster credit decisions, FinTech is supposed to provide a broader range of payment options than traditional banks. Traditional forms of payment are nonetheless vital to the functioning of most cutting-edge enterprises. Below is a collection of some of them:
It is considered a certified document because it contains an amount that can be paid to the bearer and exchanged for cash. It is thought to be the best method of payment for businesses that receive a high volume of checks, such as charities and mail-order companies.
Cash on Delivery
It is typically used for online purchases, with the person physically delivering the order to the customer’s location and receiving payment for the order’s cost.
Credit – Debit Cards
The majority of global payments involve the use of cash that a user has in their bank account at the time of purchase. They allow you to make purchases in installments without physically handing over the money. When you use a debit card to pay, the money is immediately withdrawn from your account.
It should be noted that most businesses choose payment acceptance because it is a time-consuming process. Sometimes the choice isn’t between digital and physical payments but rather between a solution that meets the needs and features of your target audience. Long-standing financial institutions have a strategy for purchasing and investing in cutting-edge financial technologies.
Today, financial technology solutions for businesses must have the following well-defined features:
- Digital Channel Sophistication – It capitalizes on creating end-to-end experiences through omnichannel strategies.
- Data Management – Data analysis leads to continuous improvements in the bottom line and customer experience.
- Virtual and Augmented Reality – VR and AR-based devices improve usability and user experience in unfamiliar environments.
- Virtual Assistants – Technological advancements enable the development of advanced systems that automatically understand and predict customer behavior.
- Business Intelligence (BI) – Dashboards are built on BI, which allows you to track activity peaks, analyze customer behavior across multiple channels, and make better decisions based on real-time data.
- Flexibility – Fintech enables money management to offer multiple payment methods to carry out multiple transactions, simplifying required documentation and allowing new metrics to be undertaken to analyze customer behavior.
Consumers now value digital innovation, social commerce, and financing flexibility above all else. Customer preference remains for contactless payments, but the rise of mobile payments appears to be here to stay. Although cash reigned supreme only a few years ago, it has since all but vanished from circulation. For instance, since the epidemic, debit and credit card use in Germany has surged dramatically, albeit it is not alone. As time passes, even the tiniest kiosk will need to have a payment terminal installed because of the increasing prevalence of digital transactions. Providing pleasant payment processes for clients is essential for maximizing revenue and decreasing expenses.