One of the most disruptive industries to emerge in recent years has been the rise of fintech. These changes will inevitably transform how financial transactions are conducted and revolutionize how banks operate. Companies like Button Finance, a fintech digital lender, are leading this revolution.
Fintech is not just about digital payments or smart banking solutions. It also keeps pace with people’s needs by bringing financial innovation to new levels. As traditional financial institutions adapt to this brave new digital world, new technologies will force them to adapt or die off altogether.
Here’s how fintech will change traditional finance, and how Button Finance is leading the way to fill the gap.
Will digital assets replace traditional counterparts?
Even though fintech is disrupting banking, most assets of any consequence are still physical, including checking and savings accounts, loans, and mortgages.
The rise of cryptocurrency and other digital assets may lead you to believe that fiat currency will soon be dead. While digital assets aren’t poised to replace their traditional counterparts anytime soon, technological advances are changing the game — and Button Finance is a key player.
Button Finance is using technology and smart underwriting to change home equity loans. The company integrates artificial intelligence (AI) into its underwriting platform to serve traditionally under-banked borrowers and allow them to tap into the value of their homes.
How traditional lenders are working with fintech players
Financial institutions are looking beyond conventional solutions to meet customers’ needs in new and better ways. Many examples of successful partnerships exist — Home Depot partners with GreenSky, Ally Bank partners with Better Mortgage, and JP Morgan Chase was once partnered with Ondeck Capital.
Traditional lenders are partnering with fintech players to leverage new financial technology. For example, they’re looking to fintech to:
- Revamp customer acquisition practices to emphasize digital communication, including utilizing social media advertising
- Streamline online applications for most products and account openings
- Develop native apps that enable customers to access bank accounts, make deposits and transfers, pay bills, and manage finances
- Using digital interactions whenever possible to increase the focus on better and easier access to customer service
- Deploy cloud-based systems to replace legacy infrastructure
By partnering with fintech, lenders can use social, mobile, analytics, AI, and IoT (internet of things) to create new opportunities and business strategies.
What is the most susceptible part of the ecosystem?
Legacy systems that previously fueled growth have reached a maturity point. As fintech disrupts traditional business methods, a few areas stand out as the most vulnerable.
Traditional institutions that rely on brick-and-mortar storefronts are susceptible. Because they lack a digital presence, their range of offerings and number of customers may not grow as quickly — the fintech model increases customer acquisition rates at a lower cost than traditional banking.
Fintech threatens financial institutions that limit their offerings to low-value financial services and products. Checking accounts, savings accounts, and credit cards are commodity products.
Perhaps the most susceptible part of the ecosystem is any business that doesn’t persistently focus on the customer experience. Studies indicate that about 97% of customers share their very good or excellent customer service experience, which is crucial for customer expansion. Additionally, nearly 70% of customers would spend more money with a company based solely on their excellent customer service.
Button Finance focuses obsessively on improving the customer experience by reducing friction in the application process and providing near-instant credit decisions. The technology and underwriting process is designed for American homeowners traditionally underserved by banking products. Now, homeowners can achieve financial independence by accessing their home equity to pay down high-interest debt and make value-enhancing renovations.
Fintech automation and the roles it threatens
The roles that lend themselves most to automation are those for which human intervention is only necessary in exceptional cases. Think of a teller counting bills at a bank. Machines can count bills better and faster than humans, so no one would argue against automating that process.
Other roles threatened by fintech include:
- Underwriting: Determining the risk of lending to a particular borrower is currently an unsophisticated process where bankers rely on outdated metrics with limited legitimacy to risk assessment. Machine learning and AI have fundamentally transformed how credit decisions are made today. These technologies enable companies like Button Finance to provide near-instant approvals with minimal manual intervention.
- KYC and customer validations: Knowing your customer (KYC) and verifying customers are crucial to preventing fraudulent behavior and ensuring client integrity.
- Customer communication: The entire borrower communication process is antiquated —borrowers want to get on the phone with a “real” person. Still, the process is non-intuitive and not easy for borrowers to navigate.
There’s no doubt that fintech will change banking and disrupt traditional finance. By marrying the latest in technology with traditional finance, fintech can help banking and lending change for the better — and that’s our goal at Button Finance.
At Button Finance, we’re obsessive about delivering the best customer experience, and we’re leveraging technology to make it happen.
Great content! Keep up the good work!