AN OVERVIEW ON HOW CAN FINANCIAL TECHNOLOGY (FINTECH) TRANSFORM THE FUTURE OF BANK SERVICES AND PERFORMANCE: A CHALLENGE OR OPPORTUNITY?

Abstract

Digital transformation creates challenges in all business sectors and industries, and as a result of this most of the economic activities are becoming highly digital. The development of digital transformation has also clearly started the emergence of Fintech (financial technology) initiatives, which are recognized as some of the most important innovations in the financial industry. These initiatives are developing very fast, driven partially by the sharing economy, regulations, and information technology. However, researches in the field of Fintech remain still in its very early stage.

In the past several years changes in the technological improvements and financial innovations had a great impact on the financial system. Globally, the banking industry has changed and integrated the financial technology in its everyday activities. So, for some financial members Fintech provides a big threat and a challenge for the traditional banking, while for some others it provides an opportunity for more flexibility, better service functionality and higher service quality. Generally, banks adopt innovations to satisfy customers’ demands and needs, despite the risks and challenges imposed from the technological era. All in all, besides the imposed challenges, banks benefit from opportunities of the new services in the aspect of allocating more efficiently the resources, reduction in transaction costs, promotion, revenue growth and profitability.

The aim and objective of this overview paper is to identify and evaluate the main benefits and risks related to the development of Fintech and financial innovations that banks are exposed to (on micro and macro level), and to provide recommendations on the reduction of those threats and control them. Based on lots of researches it was proved that one of the major difficulty of the financial innovations is the negative impact of the new financial service development on banking services. It is acclaimed that in times of technological boom it is better for banks to invest their available funds in appropriate techniques for successfully adopting new financial product/service development.

Finally, for a very long time banks enjoyed a comfort zone for guiding and offering traditional financial services. But today, banks are facing major dangers from the technological innovations, including the potential entrance of Fintech start-up companies. That is why banks are willing to go through several proactive activates to create values, save their market position and keep their customer base high. Moreover, banks are working towards improving their efficiency in the process of automation, processing data and digitalization.