The World Bank estimates that 31% of the adult population worldwide is unbanked. This pertains to individuals who lack access to credit institutions or bank accounts.
What Is the Definition of Fintech in the Retail Industry?
The alternative solutions introduced by financial technology can be an advantage for retail banking, which is why FinTech is synonymous with financial inclusion. In the present day, technological advancements and changes are paving the way for the online availability of nearly everything in our lives. The fintech sector is providing banking institutions with tools that are more efficient than ever before, such as chatbots to improve the customer experience, mobile applications to provide customers with real-time access to their bank accounts, and machine learning to protect against fraud.
Fintech is transforming the finance and financial sector. You are aware that the collaboration between fintech and banking is the icing on the cake for customers. They can access banking services from the comfort of their homes and benefit from the available technological advancements. Additionally, the banking and financial sector is currently experiencing the most significant transformation of the decade as a result of digital fintech solutions.
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Retail Banking Fintech Applications
Mobile Finance and E-Wallets
E-wallets have revolutionized how consumers send payments. Currently, digital payments are characterized by sophisticated features that have facilitated the rapid, secure, and convenient processing of transactions. The banking industry is experiencing a beneficial effect as a result of e-wallets, which are the primary source of digital payments. To deposit funds into the wallet, users must provide their bank account information. This also results in a broader customer base for institutions. Banks have been compelled to develop mobile applications that provide FinTech banking services that are more convenient due to the growing popularity of smartphones.
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Artificial Intelligence
FinTech has the potential to revolutionize the finance and financial sector by providing AI-powered solutions. Fintech companies use AI to automate and expedite processes.
- Identify security vulnerabilities or fraud
- Improve the quality of consumer service
Therefore, the integration of AI and ML in financial services can assist banks in the automation of their processes, the prevention of fraud, and the acquisition of detailed insights to guide informed decision-making.
Democratization of Financial Institutions
FinTech has been instrumental in the democratization of financial services, thereby increasing their accessibility to a broader spectrum of individuals and enterprises. FinTech is utilizing mobile technologies and digital platforms to eliminate the entry barrier to the financial ecosystem. This enables potential customers who are unbanked or underserved to readily access financial services.
Personalization and Data Analytics
FinTech companies are utilizing data analytics to offer customers financial products and services that are both innovative and highly personalized. The FinTech apps’ sophisticated analytics feature enables them to evaluate consumer behavior, credit history, and spending patterns. FinTech can provide their customers with customized solutions by leveraging this data. Additionally, institutions may capitalize on FinTech solutions.
Smart Chip Technology
The financial sector has been substantially influenced by smart chip technology, which is also referred to as EMV (Europay, Mastercard, Visa). One of the most apparent effects of smart chip technology on the financial industry is the enhanced security of payment transactions. These chips generate distinctive codes for each transaction, rendering it challenging for fraudulent actors to acquire illicit access.
Reimagined Customer Service
In comparison to the solutions that FinTechs propose, traditional players are still in the early phases of developing customer-oriented solutions. FinTechs empower consumers to a significant extent by prioritizing 24/7 access to services that are accessible through non-traditional channels, such as social media. The primary medium for connecting, engaging, informing, and understanding customers (from the mass “social mind” to the minutiae of every individual) will be social media by 2020. Additionally, it will be the location where customers research and compare banks’ offerings.
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In the banking sector, channel diversification will be a critical factor over the next five years:
- The utilization of mobile applications is anticipated to increase by more than 90% of banks, which is significantly higher than any other financial sector.
- Additionally, it is anticipated that the utilization of websites and/or web-based platforms will experience a rapid increase in users (82%).
- Traditional providers are increasingly adopting a “mobile-first” strategy to engage with consumers. For instance, they are designing their products and services to optimize customer engagement through mobile devices.
- A mobile application is currently being developed by 18% of the respondents in our survey, while over half (52%) of them provide it to their consumers.
Ingenious Solutions
New entrants are focusing on segments that require the most urgent attention from the consumer by observing and frequently experiencing firsthand what banks offer – or do not offer. Through the development of solutions that are highly effective and narrowly defined, they have been able to occupy and dominate segments that have been neglected by traditional institutions in terms of their offerings. Particularly, FinTechs are providing:
- Alternatives for customers with inadequate or nonexistent credit ratings who are unable to obtain loans
- Peer-to-peer (P2P) marketplaces for consumers who are unable to obtain loans from traditional sources
Biometric Instruments
The biometric sensors feature of FinTech has significantly innovated the financial industry. This innovation is referenced in nearly all of the most prominent fintech predictions and trends. Currently, financial services such as mobile banking, online payments, and ATM transactions can be incorporated with biometric sensors. These sensors contribute to the financial sector by reducing fraud risks, improving convenience, and enhancing security.
Financial Inclusion
FinTech has the potential to promote financial inclusion by offering access to essential financial services to underserved and unbanked populations. FinTech companies are facilitating the expansion of banks’ consumer base to include both banked and unbanked individuals from around the world by providing mobile banking, cross-border remittance, and agency banking solutions.
Regulatory environment
FinTech’s AI-powered capabilities and security features can effortlessly comply with all regulatory bodies’ security and compliance standards. So, the regulatory landscape becomes simpler and easier to comply with when banks collaborate with FinTech.
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Top 6 Case Studies of Big Logos
1. Amazon
Fintech Innovation: Amazon Pay
Overview: Amazon Pay allows customers to use their Amazon account to make purchases on third-party websites. This integration simplifies the payment process and leverages Amazon’s extensive user base.
Impact: By reducing friction in the checkout process, Amazon Pay has contributed to higher conversion rates for partnered retailers. It also enhances customer trust due to Amazon’s established reputation.
2. Walmart
Fintech Innovation: Walmart Pay
Overview: Walmart Pay is a mobile payment service that allows customers to pay for their purchases through the Walmart app.
Impact: The service has streamlined the checkout process, improving customer satisfaction. Additionally, it provides Walmart with valuable data on customer spending habits.
3. Starbucks
Fintech Innovation: Mobile Ordering and Payment
Overview: Starbucks’ mobile app allows customers to order and pay in advance, skipping the line.
Impact: This innovation has significantly increased transaction speed and customer satisfaction, leading to higher sales during peak hours.
4. Alibaba
Fintech Innovation: Alipay
Overview: Alipay is one of the world’s largest mobile payment platforms, integrated with Alibaba’s e-commerce ecosystem.
Impact: By offering seamless payment options, Alipay has driven consumer engagement and increased sales across Alibaba’s platforms.
5. eBay
Fintech Innovation: Managed Payments
Overview: eBay’s Managed Payments system streamlines the payment process for buyers and sellers by integrating multiple payment methods.
Impact: This has improved user experience and seller satisfaction, leading to increased transactions on the platform.
6. Nike
Fintech Innovation: Nike App and SNKRS
Overview: Nike’s apps allow for mobile payments and exclusive access to limited releases.
Impact: These apps enhance customer engagement and drive sales, particularly among sneaker enthusiasts.
What Will the Future of Banking Entail?
In the future, incumbent banks can learn from the movement of unbundling the bank, which adheres to the principle of utilizing division of labor to specialize in performing specific tasks proficiently. Full-service banks are compartmentalized machines that operate by executing predetermined duties within divided units. The fintech revolution has been motivated to innovate by the realization that these have become both rigid and expensive for the end user over the years. Consequently, solutions to requirements are being developed.
I believe that there will be two distinct types of large banks in the future: one that is straightforward yet efficient, and the other that offers consumers and businesses standard banking services for borrowing and spending. The second will be a holding company that manages investments in a variety of independent firms that provide the unbundled banking options that FinTech is advocating.
As fintech continues to evolve, its impact on the retail industry will likely grow, offering even more opportunities for innovation and growth. Retailers that embrace these changes and invest in fintech solutions will be well-positioned to thrive in the future.
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