If you have ever used your smartphone to make UPI Payments, completed a transaction via phone banking or online banking, renewed your insurance policy online, or traded or invested through an online platform, you’ve already experienced FinTech. FinTech short for Financial Technology is simply an umbrella term. FinTech has become an integral part of our daily lives, simplifying financial activities and enhancing access to financial services.
As citizens of 21st Century, we enjoy several benefits that we take for granted. We live in an era of extraordinary access and connectivity. The rise of the internet and software technology has revolutionized the way we handle money and manage our finances. FinTech has become one of the most significant industries today. Let us now understand what impact FinTech has on our lives.
– Advantages of FinTech on our daily lives:
1. Personalize the way you manage your finances:
Previously, many banking transactions were limited in scope. However, now FinTech enhances control over finances, allowing users to manage auto-debits, currency exchanges, and account organization, with many providers offering these features and additional options.
2. Effortless and rapid money transfers:
A key benefit of FinTech is its seamless integration with various services. Money transfers and currency remittances are quick and easy with just a tap. Banking details are often securely stored in our email, enabling smooth and safe transactions without re-entering information.
3. Connect the unbanked to financial services:
FinTech offers more financial independence and stability by allowing people, especially in underserved areas, to create online financial accounts with just a smartphone and internet connection, making banking more accessible to the less fortunate.
4. Your pocket-sized financial expert:
Financial management applications are commonly designed to offer users a better understanding of their financial position. Several features included in online banking software are aimed at assisting users, such as charts, graphs and reminders of the last payment made.
5. Say goodbye to wallet loss concerns:
Since your wallet is now in the form of an app or software, you can step out of your home without carrying cash and still make purchases using your smartphone. Most of the businesses today promote and encourage digital payment options to make transactions easier. We are gradually moving towards a cashless society driven by contactless payments.
6. Innovative solutions for Small Businesses
Small businesses have greatly benefited from FinTech. Online lending platforms provide easy access to capital, bypassing traditional bank loans. Additionally, FinTech has introduced payment solutions like point-of-sales systems, invoicing software, and online marketplaces, improving efficiency and streamlining operations.
– Disadvantages of FinTech on our daily lives:
1. Threat to security:
Despite many benefits of FinTech, cyber security remains a major concern for companies. The shift to digital platforms increases the risk of cyber threats like data breaches and attacks. FinTech firms handling sensitive financial data are prime targets for cybercriminals.
2. Obstacle in Compliance and Regulation:
Another major challenge is complex regulatory environment. The fast pace of innovation and global reach of FinTech often outstrip existing regulations, creating a gap between technological progress and legal frameworks. This leads to uncertainty and operational difficulties as companies navigate a mix of international laws and regulations.
3. Issues with Customer Relationship:
The shift to online and digital-only banking through FinTech innovations has reduced customer interaction, leaving those who prefer traditional, face-to-face banking feeling neglected. Older customers or those not so familiar with technology may feel underserved by digital platforms. This can lead to dissatisfaction and erode loyalty among a significant part of the customer base.
4. System Stability:
Dependence on technology makes FinTech solutions prone to downtimes and glitches, which can disrupt services, causing customer dissatisfaction and financial losses. System failures affect operations and harm a company’s reputation if customers see the brand as unreliable.
5. Employment Disruption:
The automation and digitization in FinTech has reduced the need of human labour, especially in transaction processing, data entry and customer service. This can lead to job displacement and require companies to restructure for a more tech-focused approach. The impact on employees and communities can be significant.
6. Economic Gap Challenges:
While FinTech can expand market reach, its reliance on advanced technology creates barriers in less developed markets where such tech may not be easily accessible. This limits the impact of FinTech services, potentially excluding large sections of the global population, especially in areas with limited technological access.
– Cyber Crime:
According to the Indian Cyber Crime Coordination Centre (I4C), Indians lost over Rs. 11,000 crores in the first six months of 2024, with 6,000 complaints filed daily on the National Cyber Crime Reporting Portal. On an average Indian victims reported losses of Rs. 60 crores per day.
A report from RBI has highlighted a concerning rise in bank fraud cases during the first half of the fiscal year 2024. From April to September 2024, there were 18,461 reported frauds amounting to Rs. 21,367 crores.
– CONCLUSION:
In conclusion, FinTech has undeniably transformed the way we manage our finances, offering numerous advantages such as personalized financial management, fast money transfers, and increased accessibility for the unbanked. However, it also brings along significant challenges, including security risks, regulatory hurdles and potential job displacement. The rise in cyber crimes and the increasing number of fraud cases highlight the need for enhanced security measures and stronger regulations to safeguard users. As FinTech continues to evolve, it is crucial to balance innovation with caution to ensure that its benefits are maximized while minimizing its risks.
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The article is authored by Ms. Ritika Sharma from Team RichVik.