FinTech is an actively developing sphere at the intersection of financial services and transaction management methods. This spectrum of technologies is the driver of progress in the field of advanced solutions to control business aspects, and every year, the influence of appropriate tools and services in this environment increases. FinTech includes innovative applications, software, and business models designed to optimize financial services globally and create more convenient channels for transactions. Sangwan et al. (2019) call FinTech “the future of the financial industry,” which is reasonable due to constantly updating technologies (p. 72). Today, this industry is evolving to compete with traditional banking algorithms, transaction channels, and from a global economy perspective. This work aims to highlight the impact of FinTech on individual industries, compare modern and classic payment principles, and provide recommendations for the implementation of technologies.
Impact of FinTech on Traditional Banking
Traditional banking operations, which include control over user transactions, payments, funds withdrawal, and other procedures, have undergone significant changes due to the development of FinTech. Investing in this industry stimulates an active transition to advanced methods of managing various operations, which are designed to simplify and speed up work. The banking environment has become one of the key areas in which the adoption of FinTech has manifested itself most clearly.
Transition to Updated Banking Operations
Payment systems that involved applying credit cards were the first step in the transition to FinTech, which simplified the work for both banks and users themselves. However, as Galazova and Magomaeva (2019) argue, the beginning of the global transformation of the banking sector began after the global crisis of 2008 when the threat of credibility to financial transactions arose. According to Chen, Li, Wu, and Luo (2017), the digitalization strategy has become dominant and has driven the transformation of the traditional banking system through the introduction of electronic payments and transactions as reliable algorithms.
Differences from Traditional Approaches
E-banking services have become common tools that have replaced outdated transactions and technologies of direct user participation. At the same time, some aspects of such services have caused significant efforts. For instance, Sandhu and Arora (2020) mention increased security requirements for digital transactions since many customers have doubts about the reliability of bank transfers and see cyberattacks as a threat. Nevertheless, modern standards of security and protection of client assets allow maintaining a stable system of financial payments globally and simplify control over all banking procedures. Some clients question the convenience of electronic banking because such a system implies depersonalization of all procedures, while face-to-face interaction with bank employees is crucial for many clients (Sandhu & Arora, 2020). However, when considering the speed and security of transactions, FinTech has had a significant impact on the traditional banking sector.
Impact of FinTech on the Global Economy
Mass Digitalization in the Financial Sector
The introduction of FinTech has become one of the decisive factors in the emergence of numerous control systems in economically significant regions of the world. Knight and Wójcik (2020) call these systems hubs and note that sites in London, Beijing, New York, San Francisco, and other metropolitan areas are created to control all digital transactions, thereby building a single global digital network. In addition, as the authors state, a number of anchor organizations are emerging to deliver purely digital financial services to drive sustainable systems (Knight & Wójcik, 2020). For providers, this transition is more convenient, despite the aforementioned risks, since due to fast transactions and payments, the organization of transactions and transfers is simplified. As a result, the global economy is centralized through the productive use of FinTech hubs and the stimulation of interaction among partners in different parts of the world.
Wide Financial Market Coverage
In addition to functionally friendly algorithms promoted through FinTech, this industry impacts the global economy by encompassing multiple fields in which transactions and payments are applied. As Haddad and Hornuf (2019) state, insurance, currency exchange, asset control, and other areas involve utilizing FinTech algorithms as mechanisms that facilitate the establishment of monetary relationships among stakeholders. The stock market, as a global trading platform, has become more active due to the introduction of electronic systems and instant payment tools that have reorganized the mode of operation (Haddad & Hornuf, 2019). Thus, FinTech has impacted the global economy and continues to advance adaptive approaches to managing rapidly evolving digital financial transactions.
Easier Transactions due to FinTech
Electronic Money as a Convenient Means of Payment
FinTech has brought many new things to traditional payment and money transfer systems, and one of the implications is the emergence of electronic money as a convenient means of payment. According to Ferdiana and Darma (2019), all financial transactions performed with electronic currencies are fast, and the value of digital deposits is identical to those of traditional ones. As Iman (2018) remarks, most modern mobile platforms support the remote payment option when funds are debited from the linked user’s account. This practice speeds up any monetary transactions significantly and helps avoid routine banking procedures with data verification, the receipt of checks, and other nuances. In addition, due to FinTech, electronic money is in demand all over the world, which eliminates the challenges caused by the lack of appropriate services. Therefore, with the introduction of such digital currency, any transactions have become easier and faster.
Globalization of the Transition to Digital Transactions
The overwhelming majority of modern platforms providing services for sales, insurance, lending, and other procedures involving financial transactions have moved to a digital format of interaction with customers. Iman (2018) notes that this standardization format improves the usability of all transactions positively and minimizes the difficulties caused by delays and multi-step mechanisms. Individual payment systems that have become part of the FinTech industry allow transactions to be made anywhere in the world, thereby simplifying the interaction between the parties involved and speeding up any transactions. Digital brokers, robotic programs, and other tools automate the financial market and make it available to different clients. Moreover, security mechanisms do not imply moving from reliable authentication systems. As a result, all transactions are made easier due to the global adoption of digital instruments.
STC Pay and Apple Pay vs. Traditional Payments
Digital applications designed to provide convenient storage and processing of electronic money are common programs integrated into many mobile and online platforms. As an example, one can review STC Pay, an electronic wallet with the function of conducting financial transactions within a single application, and Apple Pay, a similar program developed by Apple and working on its operating systems. Compared to traditional payment mechanisms, these projects are widely demanded by modern users globally and are convenient and safe services that allow all transactions to be carried out quickly and remotely.
Traditional banking organizations have recognized the urgency of moving to digital platforms and acquiring in-demand applications. For instance, Camarate, El Mir, and Khadige (2021) provide an example of how, in 2020, Western Union, the global financial intermediation company, “agreed to buy a 15 per cent minority stake in stc pay at an overall valuation of $1.3bn” (para. 8). The authors also note that traditional banks often fail to compete with such services as Apple Pay and choose to integrate with them instead of fighting (Camarate, El Mir, & Khadige, 2021). This proves the relevance of digital platforms in the modern financial environment.
The launch of Apple Pay in 2014 was a landmark decision for the global financial markets, which is largely due to the stability of the brand and the popularity of this corporation’s services. According to Chiodo, Cremo, Forsythe, and Orenbuch (2020), since 2017, this system operates in 49 markets “at 12b annual transaction run-rate at a 155% CAGR” (p. 101). Such an indicator proves that traditional payments have become an obsolete mechanism in commodity-money relations. The FinTech industry has ensured steady growth and acceptance of digital platforms that are gaining new market shares regularly.
Conclusion and Recommendations
FinTech, as a steadily developing high-tech industry, has been a trend of the last decade and has advantages over traditional financial transactions. Despite some concerns, for instance, the lack of direct interaction or security threats, digital tools used in payment systems are in demand due to the speed and convenience of all procedures. STC Pay and Apple Pay, as examples of such platforms, prove the relevance among users, and the interest of traditional banks in the transition to online interaction with the target audience is justified. To promote their services successfully, financial organizations need to transform obsolete transaction channels and implement remote payment options to meet customers’ needs. In addition, constant monitoring of innovation is imperative to maintain client interest in a wide variety of digital assistive tools.
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