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Individual Assignment
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Table of Contents

Introduction......................................................................................................................................3

Advantages of Fintech.....................................................................................................................3

Disadvantages of Fintech.................................................................................................................4

Impact Assessment..........................................................................................................................5

Fintech’s role in transforming traditional financial services.......................................................5

Positive and Negative Societal Implications of Fintech..............................................................7

Fintech’s effect on business, economies, and individuals...........................................................9

Recommendations..........................................................................................................................10

References......................................................................................................................................12
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Introduction

Fintech companies are those that focus on providing financial services or apps that do not

require a lot of technology. Whether it is automated or sophisticated financial technology, it

attracts clients. Fintech thrives by offering novel solutions inside the contemporary financial

landscape framework. Better client experiences, efficiency, and accessibility make these

solutions unique. The objective of the present assessment is to investigate the importance of

fintech from several angles. Consequently, benefits and drawbacks are explored. Impact analysis

is looked at from multiple levels. Recommendations for banking institutions combined with

outside Fintech companies are established based on the drawbacks.

Advantages of Fintech

● Major access to financial resources- Companies associated with Fintech generate

algorithms to accept payments from traders or services in the best seamless ways. It is not

only safe but drives growth for business. For instance, Zoocasa, Casalova, and many

more are utilizing fintech to transform their marketplace (PWC, 2023)

● Optimization of the entire business procedure- Streamlining the transaction process, and

acquiring a fintech solution promotes organizational competency and growth. Adopting a

new financial technology does not necessitate a drastic change to infrastructure because

of fintech. The latest instances include Personal Capital, Lending Club, and Wealthfront.

Over the previous ten years, all of these businesses have exhibited consistent progress

(Schroer, 2024).
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● Improving customer retention- Improving customer retention is a common goal within

the financial sector. It is recognized as one of the major reasons fueling financial services.

Customers are offered personalized experience with the assistance of Big Data Service,

and AI.

Disadvantages of Fintech

● Security Risks-Fintech is being usually favored because of its cutting-edge technology

approaches. Contrarily, these technologies rely heavily on data, which frequently poses

several security problems. For instance, around 900 Canadian finance companies have

been hit by the MOVEit cyberattack. One of the main victims of security risks making

use of this vulnerability is the Canadian Imperial Bank of Commerce (CIBC) (Pandalge,

2023).

● Issues in accessibility- Fintech is mostly automated providing seamless banking.

Therefore, risks are associated with a lack of physical branches when customers require

immediate support. The online medium might not be convenient for many clients to solve

their queries. One of the common examples would be HSBC apologizing to UK

customers because of locked-out digital banking issues. People failed to make crucial

payments as the website was jammed in one of the most active shopping days (Guardian,

2023).

● Global Imbalance- Fintech is given priority because of its enormous economic impact on

the world. On the other hand, it has equal responsibility for the global imbalance. For

example, businesses in this sector mostly support the discrimination against low-income

clientele in the financial services sector by affluent persons.

Impact Assessment

Fintech’s role in transforming traditional financial services

Financial technology has eventually emerged as a consequential player providing fintech

services over the last decades. Along with making revolutionary transformations by introducing

digital platforms Fintech has come contributed ample aspects in altering the traditional financial

services. One such aspect is lending and financing, this revolution aids in transforming the

traditional banking sector. Replacing it with opportunities for borrowers, businesses, and lenders.

Some transformations noted within this sector are an enhanced system of credit models,

improving speed, and efficiency, and increased transparency with lowered costs. The

transactions which are conducted online support peer-to-peer (P2P) invoice financing,

crowdfunding, and lending. Unlike the traditional system borrowers now can access these

capitals along with investors, reducing the associated costs, and intermediaries.

Figure 1: Fintech’s evolution over the years

(Source: University of Bath, 2022)

The global market value of Fintech is assumed to be 127.66 billion dollars, it is expected

to grow around 309.98 billion dollars with an annual growth rate of 24.8% (University of Bath,

2022). On the other hand, wealth management, and financing are enhanced by the introduction of

fractional investing, robo-advisers, cryptocurrencies, and blockchains. For example, bank

innovations with the utilization of chatbots to handle clients through IBM Watson. This

technology uses AI to understand the insights of its clients. Utilizing real-time and historical data

to analyze and forecast future events is made easier by the integrated machine learning

technology.

Another fintech firm that helps with debit and credit purchases for exchange-traded funds

is called Acorns. With the help of fintech technology, the company has attracted 8.2 million

clients since 2012, who have invested $2 billion on this platform (Tomych, 2023).

Through neo-banking and the simplification of the mortgage system, fintech has expedited

banking systems. Customers will find it more convenient to use UPI payment systems like

PayPal (PYPL) than they will with traditional payment methods. Additionally, a wallet system

that enables users to store interest-bearing currency was offered by these payment firms. With

the advent of QR codes, paying via many channels and keeping track of partial payments has

become simpler.

Platforms for non-financial companies can access financial services through embedded

finance, in contrast to the conventional system. This enables companies who have not

historically participated in the financial ecosystem to do so. One of the most prominent

instances of an e-commerce platform is Amazon. Along with other third-party websites where

such payments are accepted, the Amazon Pay function facilitates simple payment transactions

(Cross, 2023). Consumers may make full purchases by using the payment methods that are
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already linked to their accounts, within a few seconds rather than arranging cash with lower

denomination, and saving them the trouble of entering information twice on different websites.

Figure 2: Advantages of using Amazon pay

(Source: Cross, 2023)

Positive and Negative Societal Implications of Fintech

Opposing racial inequality is a major aspect when it comes to the harmful social

ramifications of Fintech. Many marginalized groups are frequently subjected to racial inequity.

Individuals with little discretionary income frequently struggle to accumulate equity. Most

banking institutions turn down black applicants at a rate that is 80% higher than that of White

applicants. Nearly 70% of individuals in the developing world lack access to financial services,

according to the International Labor Force (World Bank, 2023). Contrarily, the financial sector

of Fintech provides the advantage of having social welfare with the inclusion of financial

inclusion. This fact is responsible for consequently expanding, and engaging with a reasonable

amount of impact-driven capital investment. As a result, fintech companies are profiting with a
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combined market value of 133.84 billion dollars. It suggests a future growth of 556.58 billion

dollars by 2030 (Fintech Social, 2023).

Figure 3: Highlights the differences in mortgage rates as per race

(Source: Su, 2023)

Instructing clients on the substantial benefits of financial inclusions is another positive

aspect of fintech applications. In Canada, for instance, 98% of students have a financial

institution account. Approximately 40% of students have a financial account, including those

who are the lowest. The nation has made significant attempts to strengthen its financial capacity

(Global News, 2019). As a positive impact, fintech is a major contributor to reducing

environmental impact. It helps consumers to overcome weather and economic challenges. The

instant digital platform reduces footprint as well as accelerates efficient budgeting.

Even while fintech companies, their offerings, and their transparency are excellent, there

are still some problems related to digitalization. Visa, for example, promised to digitize 50

million small and micro companies by the end of 2023. Since 2020, though, the outcomes have

been quite few. MasterCard also promised that by 2025, 1 billion individuals will have access to
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work possibilities in the digital economy (Cumming et al. 2023). Complete data is still lacking,

which will prevent their goods from researching the neglected. Contrarily, fintech offers

numerous groundbreaking solutions in terms of economy to society. Their risks, openness, along

failures are what embrace a trial-and-error approach emphasizing innovation. Countries which

associate with more developed, and deeper financial systems are likely to achieve higher growth

resulting in equity, and poverty reduction.

Fintech’s effect on business, economies, and individuals

Fintech formerly concentrated on large corporations, but they are now also focusing on

small businesses. Fintech allows small businesses to launch online storefronts and reach a wider

customer base by selling their goods and services. These platforms include but are not limited to,

Squarespace, Magneto, Shopify, and many more. Furthermore, several advantages occur in the

background. Although these advantages might not be apparent to typical clients, they are

beneficial for the company as a whole. In terms of overall business Fintech provides special care

with tax, accounting, and monitoring. The contemporary financial solutions in fintech create a

variety of software supporting automated accounting. While it concerns traditional businesses

with large sums of money, fintech is making it happen with a fair amount and streamlined

accounting saving time.

In general, fintech aims to amplify labor productivity fostering the fastest economic

growth. A significant favorable increase in GFP growth is also captured. For instance, the USA

worldwide market contributes over 50% of the shares. As a result, the US economy is expanding

quickly in terms of loans, savings, insurance, and per capita income. The hub of fintech funding

and investment is also said to be located in the United States (Kania, 2023). Fintech is, in a
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sense, a financial accelerator everywhere. Improving difficult financial transaction courses is the

aim. The financial sector's fast amplification is expected to spur economic growth as well.

Canada is another example which started adopting fintech after the pandemic. In due process,

this country has witnessed a growth of 7 billion dollars that immediate year, recording 217 deals

(FinTech Futures, 2024).

Better financial insights into money management are being provided by fintech, which is

affecting people. The percentage of Americans who handle their money wisely is roughly 48%,

compared to 84% more respondents from the UK. The income spectrum has changed by 80% as

a result of the fintech technology adoption, which began in 2020. Globally, 82% of men and 78%

of women, respectively, associate fintech with their specific gender. Even though many clients

don't comprehend the process, fintech applications improve revenue per user by 10%

(Khimchenko, 2020). People are recovering from all of their traditional techniques' of financial

errors thanks to fintech. Fintech has led to an increase in user activity and financial control.

Customers are becoming more and more interested in innovation and a future driven by

technology thanks to this system.

Recommendations

1. Reassessing goals towards investing in fintech startups is the first recommendation.

Before pairing it is significant to revise strategic objectives.

2. Banking is more about people-to-people convenience, thus community banking relies on

the workforce. Therefore, banking institutions must be more bothered by working

dynamics than completely relying on fintech innovation.

3. Reevaluating vendor management can help bridge gaps in fintech collaborations. Vendor

management is used by several banks, which demand credentials and financial data that

fintech businesses fail to supply.

4. Latest fintech solutions are extremely tempting but the banking focus must be strongly

towards adding value rather than introducing novel tech trends.

References

Cross, M. (2023, January 24). How Amazon, Apple, facebook, google are infiltrating financial

services. American Banker. Retrieved on February 5, 2024, from:

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infiltrating-financial-services

Cumming, D., Johan, S., & Reardon, R. (2023). Global fintech trends and their impact on

international business: a review. Multinational Business Review, 31(3), 413-436.

Retrieved on February 5, 2024, from: https://www.researchgate.net/profile/Robert-

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Global News. (2019, July 10). Alliance for Financial Inclusion. Promoting Financial Inclusion at

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%20security%20researchers

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%20Properly%2C%20Casalova,building%20momentum%20is%20wealth

%20management

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