INNOVATION, ENTERPRISE AND SOCIETY: ESSAY OPTION ONE
The banking sector is one that is very interesting to me because of my background in accounting and applied finance. I intend to pursue a career in banking, particularly in the financial technology (Fintech) sub-sector. The traditional banking structure and system is changing rapidly with the developments made by fintechs and other technological improvements to the way people perceive and use banks (Chen, Wu, & Yang, 2019). Today, the banking world no longer uses the term fintech as a jargon specific to a few professionals, rather, it is a familiar term that signifies the revolution and its impact on financial and banking institutions (Gomber, Kauffman, Parker, & Weber, 2018). Fintech is derived from the concept of joining digital technology to financial services, marking a new era of processes, products, and organizational innovation introduced into the banking industry and affecting almost every aspect of finance in the world. Therefore, fintechs prompt the use of current digital technology by small enterprises to develop innovative services and products including alternative finance, big data, mobile payments, financial management practices, and online banking.
Some of the notable developments in the banking sector have included the movement of fintechs from competitors to becoming a key partner for banks in the last few years. Rizvi, Naqvi, & Tanveer (2018) point out that collaborations in the banking sector have been a key industry disruptor, especially the way fintechs have changed how consumers view the banking industry. For some key industry critics, such as Zveryakov et al. (2019) and Vives (2017), fintechs have been predicted as the beginning of the death of traditional banking. However, by incorporating the unit key concept of comparing and relating small businesses (start-ups) and large corporations, fintechs and the banking world are two players in different sectors that can work very well to change the concept of banking and financial institutions. Today, accessing financial services is as easy as sending a text message. Therefore, the introduction of fintechs is not a threat to the industry but an opportunities for banks to become better in their role and capacity to support the welfare of societies and economies through providing financial services in various digital platforms.
Fintechs reveal a key concept gained from the current unit in comparing small firms to large corporations that small innovative companies are more creative and innovative compared to large organizations. Anagnostopoulos (2018) found that small companies including fintech start-ups are more innovative because of the ability to make quicker decisions and especially when executing new ideas compared to large corporations. The innovations introduced through fintechs have been made possible by the fact there are so many issues in providing financial services for the diverse populations and organizations. For example, digital lending and credit issues, mobile banking for those on the move, mobile payments to different clients or suppliers, insurance, trading, blockchain, and cryptocurrency are all areas that have shown just how innovative fintechs can become. Global players like Skrill, PayPal, LocalBitcoin, and other firms have changed how people interact with their clients and suppliers (Najafi, Irandoost, Soltanpanah, & Sheikhahmadi, 2020). These companies are a revelation that smaller companies have a better chance of being innovative because of their size, risk, opportunities, and the drive to make it in a new innovation. Large corporations, such as banks and large financial institutions cannot take the same levels of risk. Additionally, the decision making process for large organizations is relatively reduced due to bureaucracy and other issues relating to the structure of decision making. Also, Lien, Doan, & Bui (2020) assert that large organizations tend to be slower in responding to changes, are more risk-averse, already have a set culture and way of doing things, and have established markets. Overall, looking at the banking industry, it is clear that fintechs are smaller versions of banks and similar financial institutions, only that they have been more innovative and become industry disruptors.
Changes made by the fintech subsector and banks create a strong argument that the alterations in the way people access financial services through digital platforms are a part of a wider economic and social trend. In this, another major unit concept emerges, that public policy and funding of innovation and its significance and impact on the banking sector are different for the financial and digital sectors. For example, the banking industry rarely makes any significant changes to the way business is conducted, including relationships and partnerships. The banking sector works on already established concepts based on a traditional aspect. For instance, banking in the current century is relatively the same as the last one, in terms of the relationship between customers and institutions. However, the digital sector operates differently. Small changes in customer demands and needs leads to significant industry changes for digital firms (Thakor, 2020). For example, when customers demand more interactions, digital platforms and companies are required to respond quickly with changes that match the new need. Such is the concept that has largely defined how large financial institutions and the smaller start-ups in fintech subsector relate. Banks and the banking sector have remained largely the same. However, digital platforms keep changing in response to customer needs. Combined, fintechs have emerged as a new concept that converges to provide banking services using newer digital models. The funding of these innovations is significant to the industry because it means the next changes to how people relate to their favourite financial service provider. Overall, it emerges that the impact of public policy and funding of innovation is an important concept in understanding how fintechs and larger banking institutions interact.
The changes introduced by fintechs in the financial services and the digital technology, compared to how the banking industry operates, are almost permanent and likely to have significant effect to other industries. For example, the real estate industry, lending services, business services, savings, and investment businesses have all been significantly impacted by fintechs. The disruptive power of fintechs has changed how consumers view financial services in relation to new digital technologies and the daily functions that include banking and other aspects of personal finances. Consumer banking has changed significantly as more people move towards the adoption of mobile services and the digital world (Jiao, Shahid, Mirza & Tan, 2021). For example, a significant number of consumers prefer to store money in the form of various cryptocurrencies such as Bitcoin or Litecoin in a speculative investment hoping to make profits later. Traditionally, the same funds would have been stored in banks or invested in other industries such as real estate or saving unions. As expected, the changes are likely not to be reversible. People now understand the power of digital platforms and better financial services are available for people in different levels and platforms.
Innovations in the banking industry and the financial services sector have also affected professional practice. Today, a majority of professionals in the said industries are transitioning to becoming experts in fintech management and including digital services as part of their job description. With the ever-changing face of digital technology, Rasiwala & Kohli (2021) posit that fintech has changed how the finance and banking professionals operate. Today, professionals are required to be familiar with new concepts such as expenditure tracking, online budgeting, chatbots, and other digital-related concepts. Every profession in the finance and banking sector is going through aggressive and continuous movement focused on digitalization and adoption of emerging and new technologies. The expectations in the future include increased operational efficiency, enhanced delivery of superior and high quality customer experience, and better speed-to-market support. The likely effect is that a lot of people will be forced out of their current positions through these emerging technologies. Digitalization cannot be escaped, especially for the financial services sector. The introduction and success of fintechs is proof that there is a need for banks to start transitioning to become bigger fintech suppliers and partners. To address the effects of these likely changes, organizational level responses will need to include individual training and education of the newer concepts. Individually, it is recommended that professionals adopt the new trends as a way of adding value to their portfolio.
In conclusion, fintechs mark a new era of processes, products, and organizational innovation introduced into the banking industry and affecting almost every aspect of finance in the world. For example, the real estate industry, lending services, business services, savings, and investment businesses have all been significantly impacted by fintechs. These innovations have led to the use of current digital technology by small enterprises to develop innovative services and products including alternative finance, big data, mobile payments, financial management practices, and online banking. In the last few years, fintechs have changed the banking sector, introducing changes that are expected to be permanent. The discussion finds that the introduction of fintechs is not a threat to the industry but an opportunities for banks to become better in their role and capacity to support the welfare of societies and economies through providing financial services in various digital platforms.
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