Electronic Payment Processing – Real Time Payments
May 11, 2022 | Allied Solutions
Financial institutions, over time, have proven adaptable. With layers of regulatory scrutiny embedded in the financial industry, and current day consumer demands adaptability has proven necessary for survival.
Traditionally, financial institutions required physical branches to extend their reach. Due to timely advancements, and thanks to the digital acceleration induced by the pandemic, that’s no longer the case. Amid the great shift that has forced financial institutions to address their digital inadequacies, partnerships have taken shape to offer the experiences that consumers have come to expect.
The term fintech (financial technology) usually leads consumers to think of services like snapshot mobile deposits, budget management on the go, and convenient tap to pay options. But the fintech reach goes far beyond convenient mobile applications, their offerings range from AI-enhanced chat bots to compliance software and more.
Adherence to banking regulations help to ensure transparency between financial institutions and their consumers which is where risk reduction through accountability and the resulting consumer satisfaction thrive. In many cases, banking required accountholders to be physically present to open an account or to apply for financial services to avoid fraud such as identification theft. Yet even today, not all banks and credit unions have the technology to verify an accountholder’s identity online. Many have deep roots within legacy systems and regulatory framework that can limit their capacity for utilizing technology.
To the contrary, financial technology (Fintech) aims to automate and improve the use and delivery of financial services and products. It’s used by companies to manage finances and processes by leveraging software. The focus has since shifted to include the consumer. Fintech is used in a variety of capacities including retail banking, investments management, fundraising and nonprofit, education, and financial services for individuals. The development of cryptocurrencies like bitcoin also came from fintech. The fintech industry is often perceived as riskier than standard banking due to its novelty. Because the advancements in fintech are ever-evolving so too are the developments in regulations. Yet consumers still gravitate to these options that offer a faster, more innovative, and user-friendly experience.
While there’s no anticipation for a complete switch from traditional banking to fintech, there is a greater certainty for collaboration. This type of collaboration can make a larger and more advantageous impact. Fintech equips the financial industry with tools that improves banking efficiencies more than ever before. Financial institutions are using tools like AI chatbots to enhance customer experience, AML software, mobile apps to give customers real-time insights into their bank accounts and machine learning to secure against fraud.
According to Cornerstone advisors, 54% of FIs will launch faster payments in the next 2 years.
Cornerstone also shared, that between 2019 and 2022, the overall importance of fintech partnerships jumped from 49% to 89%.
Traditional banking benefits from both the innovation and agility of fintech. Because of size, consumer loyalty, and established network including conventional banking regulations, financial institutions have the opportunity to boost confidence in adoptability of up-and-coming financial technology.
Fintech and FI Collaboration Benefits:
- Revenue/market growth: By merging their respective consumer base, whether through joint ventures, alliances, or acquisitions, financial institutions and fintechs can experience growth for the future.
- Infrastructure: To transfer money to an account or process payments, fintechs leverage existing payment channels of traditional financial institutions. In turn, this allows financial institutions to meet the technological demands and improve the user experience.
- Agility: The banking industry has often been preoccupied with improvised digitization. This cumbersome patchwork resolution increases internal efforts around orchestration, risk mitigation, costs and inevitable failures that could create exposure to major risks like consumer friction and downtime, security breaches, and delay in reporting and filing.
- Intelligence: New opportunities designed to generate insights are breaking down silos in banking’s internal structures. With the exponential rise in available data and increasing adoption of new technologies to query, process, analyze, and extract business insights, financial institutions are leveraging these opportunities to reduce cycle times of manual manipulation, reconciliation, and validation. Reduced touch times allow these insights to be reported and acted on sooner for business growth, regulation compliance, and meeting consumer expectation.
The financial sector continues to evolve and remaining competitive as well as compliant in this ever-changing environment is no simple task. Financial institutions are undertaking transformation efforts from complex and archaic systems to more agile operations and creating more efficient compliance processes that help navigate a dynamic regulatory environment.
The right solutions for a proper fintech and financial institution collaboration should offer a personalized online platform with quality payment, billing and disbursement capabilities for your consumers and delivers the latest standards for reliability, security and compliance.
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About Allied Solutions
Allied Solutions, LLC is one of the largest providers of insurance, lending, and marketing products to financial institutions in the US. Allied Solutions uses technology-based products and services customized to meet the needs of over 4,000 banks and credit unions, along with a portfolio of innovative products and services from a wide variety of providers. Allied Solutions maintains several offices strategically located across the country and is a subsidiary of Securian Financial Group, Inc.
Content in the blog posts are the opinion and views of the writer, and don't necessarily reflect the opinions or views of Allied Solutions.