Technology makes it easy for people to pay with their smartphones, access their bank accounts, and buy cryptocurrencies. Many banks, credit unions, and other financial institutions have caught on to this trend, investing heavily in financial technology (FinTech).
With FinTech, banks and startups can provide world-class banking services to their customers. They can also maintain a competitive advantage in a competitive banking industry.
But not all FinTech solutions are created equal.
If you’re considering a change to how you do business or are starting a financial venture, this guide will cover the ways FinTech solutions can help your business grow.
Defining a FinTech Solution
A FinTech solution is any digital system that makes banking easier. The most popular FinTech solutions are in the following categories:
- Security: Many FinTech providers offer robust digital security services. For example, some providers specialize in fraud detection, helping financial institutions keep their customers safe while staying federally compliant.
- Artificial Intelligence (AI): Many FinTech companies leverage AI and machine learning to find patterns in customer behavior, integrate sensitive information with third-party apps, and enhance customer service with AI chatbots.
- Automation: Automation is highly valued in FinTech solutions, giving banks faster turnaround times, reduced overhead expenses, and better customer satisfaction.
- Blockchain: Many banks are experimenting with blockchain technology to quickly verify payments, keep immutable financial records, and increase transaction speeds.
The Benefits of Embracing FinTech Solutions for Banks
Whether you’re involved in a new or existing financial organization, there are several advantages to relying on FinTech solutions. Here are these benefits:
Improved Customer Experience
FinTech solutions often focus on user-friendly interfaces and streamlined processes, making digital banking more accessible and convenient for customers. This can lead to higher customer satisfaction and loyalty.
For example, AI chatbots can help answer customer questions and reduce call volumes to customer support. This makes it possible for banks to reduce churn and keep their customers happy in the long run.
Enhanced Efficiency and Productivity
The automation of routine tasks through FinTech tools can significantly reduce the time and resources required for these operations, increasing overall productivity.
For example, blockchain technology helps banks decrease wire transfer times. In doing so, financial institutions can manage efficient operations and attract more customers in the process.
Cost Reduction
FinTech is undoubtedly more cost-effective than traditional banking systems. You can find a great example of this in cloud computing. Early on, financial institutions had to rely on external warehouses to store their data and run their digital operations.
With cloud computing, all of these operations happen on a secure server over the Internet. As a result, banks don’t have to pay for expensive data management equipment in large facilities. Cloud computing has a much broader bandwidth and doesn’t require nearly as much overhead costs.
Increased Global Reach
With FinTech, financial organizations can reach global audiences and streamline international transactions. For example, you can use cryptocurrencies as a replacement for any fiat currency. They are decentralized and not controlled by a single government.
Banks can allow their customers to buy, sell, and hold cryptocurrencies to engage in commerce across the world. This way, people don’t have to rely solely on credit cards and debit cards to make purchases.
Enhanced Compliance and Risk Management
Due to the rise of cryptocurrencies and digital assets, the United States is introducing new legislation to uphold integrity and transparency in these respective markets.
Staying on top of government regulations while managing risks can be a challenge for both new and growing financial organizations. Luckily, many FinTech solutions can help banks stay compliant more efficiently.
This sector is called regulation technology (Regtech). Regtech helps financial institutions monitor relevant guidelines and streamline reporting to maintain compliance.
FinTech Solutions Every Bank Needs
Running a successful, modern financial organization will come down to the services you’re providing to your customer base. To create an unforgettable customer experience, here are some baseline FinTech solutions you should consider:
1. Digital Asset Infrastructure
Digital asset infrastructure refers to all the systems and technology a business needs to offer access to cryptocurrencies and other assets over the internet. Crypto exchanges need digital asset infrastructure, such as payment gateways and crypto miners, to function.
Digital asset infrastructure isn’t just essential for the survival of crypto businesses, but it’s also beneficial to the financial industry as a whole. Financial institutions are looking to offer cryptocurrencies to their users, and with more crypto solutions fueling innovation, the industry will see greater adoption of cryptocurrencies and tokenized securities.
2. Account Opening Platform
Digital account opening platforms are revolutionizing customer onboarding with streamlined, paperless, and secure processes. These platforms make it easy for anyone to create an account from their computer or smartphone within a few minutes.
When developing an account opening platform, it’s essential to follow the latest compliance standards in your jurisdiction. For example, the United States requires crypto businesses to implement Know Your Customer (KYC) security protocols.
These help peer-to-peer (P2P) crypto exchanges verify new account holders’ identities and prevent them from being involved in international money laundering schemes.
3. Open Banking Platform
Open banking refers to the process of enabling secure data sharing and fostering innovative financial services between banks and third-party providers. This kind of exchange happens daily for users who have U.S. bank accounts.
We can see an example of open banking with Chase Bank. Chase allows their customers to integrate information from their credit profile into their bank accounts. This way, they can receive real-time alerts and monitor their credit score on a regular basis.
4. Identity Decisioning Platform
If you’re providing financial services, such as lending, a core part of your business is managing risks. With the help of an identity decisioning platform, you can evaluate the creditworthiness of applicants and protect your business from significant risks.
Using AI-powered identity verification and credit assessment, these platforms offer more efficiency compared to manually assessing individual applications at a time. The quicker your lending application process is, the better you can onboard qualified customers and refine your lead pipeline.
5. E-Wallets
E-wallets allow people to store their digital assets. You can use an e-wallet to hold cryptocurrencies, stablecoins, and even NFTs securely. If you offer crypto services, it’s essential to provide e-wallets to your customers for easy access and storage.
With that said, there are two ways you can construct the infrastructure for this solution. You can build e-wallet technology from scratch and have complete control over the end result. However, this method is time-consuming and highly expensive.
Alternatively, you can use white-label digital wallet technology. This turnkey solution is already pre-assembled, meaning you can customize it and deploy the technology into your tech stack for easy customer access.
6. Agency Banking
The financial sector is stronger when everyone can participate. By promoting financial inclusion, you can help provide financial resources to underbanked areas through third-party agents.
In El Salvador, 70% of the population doesn’t have a bank account. As a result, El Salvador launched the Chivo Wallet with the help of AlphaPoint, enabling its citizens to easily buy crypto to pay for everyday goods and services.
Financial institutions can follow the same blueprint to provide payment solutions and bank accounts to unbanked populations.
7. Know Your Transaction (KYT) Solutions
KYT solutions are essential for implementing continuous transaction monitoring to prevent fraud and enhance regulatory compliance. This framework exists on a blockchain network and helps financial institutions avoid terrorist financing and money laundering.
If you provide crypto services, it’s important to leverage a KYT tool to keep your customers safe, stay federally compliant, and protect your reputation. The crypto ecosystem is very young compared to traditional markets.
As such, many people and government leaders are worried about security and market integrity in the crypto industry. When more FinTech startups embrace KYT, they’ll be doing their part in erasing the negative stigma over the crypto market.
8. BaaS Platform
Banking as a Service (BaaS) platforms enable banks to integrate their services with non-banking businesses through APIs and partnerships. Due to the rise of cloud computing and APIs, banks can now lend their services to companies that need them.
Uber provides a wonderful example of this. The company has partnered with Green Dot Bank to issue debit cards to their drivers. With these debit cards, drivers can cash out their daily earnings and even pay for everyday items from in-network partners.
More companies are embracing the BaaS model to give their employees easy access to their money and add more functionality to their tech stacks.
9. Blockchain Technology
A blockchain is an immutable, decentralized, and public ledger distributed across a network of computers. The purpose of a blockchain network is to keep an unadulterated record of crypto or other financial transactions.
Blockchain technology is ushering in a new wave of decentralized finance. Since you can’t change its record, you can process secure transactions quickly using smart contracts.
Worldwide financial institutions like Goldman Sachs, BNP Paribas, and Deloitte use blockchain to optimize their operations and provide more financial transparency.
Embrace the Future of FinTech With AlphaPoint
Overall, the FinTech industry will continue to become a disruptive force in global commerce. If you’re running a crypto business, it’s necessary to adapt to these advancements and provide your customers with a world-class digital experience.
At AlphaPoint, we pride ourselves on our global footprint. We understand the nuances of different markets and offer robust white-label solutions to meet your specific needs:
- Exchange software
- Merchant/wallet ecosystem
- Brokerage exchange software
- Liquidity solutions
AlphaPoint also boasts an ecosystem of partners that allows us to deliver a complete system that will allow them to issue, invest, and trade in digital assets across primary and secondary markets, including:
- Payment networks
- BaaS solutions
- Custody providers
- KYC and AML protocols
- Trade surveillance
- Automated market makers
- Custody/wallet solutions
Request a demo today and see how AlphaPoint can work for you.
