Payments are a core function of banking; money is moved from one account to another. Prior to FinTech innovations payments were made either by making a trip to the bank or to a card reader of some kind where you could make the transfer via online banking. International transfers required even more effort; in the past an international payment would be expensive and slow. FinTech has changed all that.
Together with the FinTech revolution payments have been made easier thanks to ecommerce innovations like PayPal which paved the way for effortless online payments as early as 2002 when it was acquired by eBay. The revolution in FinTech and e-commerce meant that you could make an online purchase with a simple click. Even if the product was in a different country the purchase price would be automatically calculated, currency converted, fees deducted or added and the transfer completed.
FinTech Saving FX and Transaction Fees
With the advent of FinTech FX and money transfer companies began using solutions that saved FX and transaction fees thus cashing in on customer needs that were not being met by conventional banking. Thanks to the development of these solutions the value of companies like Valyuz and TransferWise soared.
One of the biggest changes in the banking industry thanks to FinTech came in the form of mobile payments which provided a way for us to make low-cost, fast peer-to-peer transfers. Mobile payments have become a multi-billion dollar industry with Alibaba’s AliPay becoming the world’s largest platform for low-value transactions handling billions of dollars annually. This sector is destined to expand even more as increasingly people become dependent on smartphones for their everyday payments and mobile payments technology continues to develop.
Electronic Money Institutions deal mostly with electronic money transfer and FX Payments but recently they have started to work in the B2B market. This has proved difficult because of the ingrained legacy infrastructure in banks which leaves little or no room for new comers. However with the establishment of a super correspondent banking network financial utilities can now provide clients with the ability to offer customers fast, secure, low-cost cross-border payments.
Accounts and the Affects of FinTech
For decades bank accounts were standard with almost all banks offering the same services and amenities to its account holders. After the financial crisis of 2008 many EMIs realized that different clients have different account needs and had become dissatisfied with traditional bank accounts. They managed to tempt customers away from traditional banks by offering smooth online banking, excellent customer service and better rates. The challenger banks in Europe offered an attractive alternative to traditional bank accounts with digital technology, no physical branches and mobile-only banking. By implementing the necessary technology challenger banks can give account holders better service and better value.
Digitization of Bank Accounts
With the digitization of banking, business and consumer account holders now have easier access to international banking services thanks to FinTech businesses and challenger banks. We are now in a new era of banking where FinTech businesses and challenger banks provide financial services to all those in need of financial services even if the client was previously unbanked; underbanked or rejected by traditional banks.