How Fintech is Shaping the Future of Banking

16. November 2020

An article by Aileen Gray


Fintech has been on a steady rise for some time now, and that rise is only speeding up due to the coronavirus pandemic. Closing banks and a desire for contactless transactions have driven accelerated growth in fintech, and at this point it doesn’t appear likely to slow down or stop anytime soon.

“Acceleration in fintech” can refer to a lot of different things though. It can involve store payments, peer-to-peer transactions, and so on. One aspect of fintech we don’t discuss quite as frequently though is its impact on the future of banking. So below, we’re going to explore this impact by way of a few specific ways in which fintech is shaping the future of bank-related activity.

Blockchain in Banking

One of the key questions associated with the blockchain revolution has been whether or not it will bring about an end to traditional financial services. To date it has done no such thing, and even as we see blockchain use expanding for all sorts of purposes, it isn’t necessarily mainstream. That said, we are beginning to read about banks and major financial institutions making use of the blockchain. These institutions are finding that blockchain-based transactions allow them to move money more quickly and more affordably — particularly in cross-border situations. This appears to signal a beginning of a significant shift in banking businesses toward fintech for internal transactions.

Mobile Banking Apps

It’s important to remember that the term “fintech” can really refer to any intersection of finance and technology that challenges ordinary means of conducting financial business. And considering this broad interpretation, it’s fair to think of the emergence of mobile banking apps as another fintech-related disruption. Simply put, more people are opting to manage their accounts, move money, and even deposit checks by way of apps on their phones and tablets. There is as a result less of a need for traditional online or in-person banking activity.

New Investment

If we consider investment as a financial activity related to the banking industry writ large, it’s also worth considering changes in investment among the ways in which fintech is disrupting said industry. Specifically, the emergence of neobanking services — like some of the mobile apps just alluded to — is threatening traditional banks not just where personal account management is concerned, but also with regard to investment. Some of these same services have introduced commission-free trading for users, essentially giving people a way of building and managing investment portfolios that is both cheaper and easier than doing it through a traditional bank.

New Forex Trading

Alongside traditional stock investment, forex and CFD trading are sometimes mentioned as related practices that are beginning to be altered by fintech. These are among the most popular investment methods in the world, and while they’ve often been practiced through large institutions, they can now operate through mobile platforms. Users can easily open accounts, take advantage of advanced tools, and build up low-cost forex and CFD trading accounts, all without needing to go through (or pay fees to) big banks or institutions.

Cryptos and Open Banking

Another fascinating aspect of fintech’s influence on banking is that among some younger people, the question is not so much whether to trust fintech or banks, but rather what sort of fintech to embrace. The debate of open banking versus cryptocurrency is becoming a real one for some millennials and Gen Z’ers looking for tech-based ways to manage their wealth — with traditional banking services effectively left out of the equation. Cryptocurrency, as you may know, is essentially decentralised digital currency traded through its own exchanges, separate from any financial institution. Open banking, meanwhile, refers to an emerging concept that more or less decentralises bank account data via third parties as a means of providing account owners with more insights and personalised services. While open banking does rely on traditional bank accounts, it’s clear that both of these options represent significant tech-based disruptions to basic wealth management.

Even given all of this, traditional banks aren’t going anywhere anytime soon. In fact, it’s a good bet that they’ll stay around for a long time, and simply adjust to a newly fintech-oriented world. But it’s clear regardless that technology is transforming the industry in numerous ways.