Accounting & Finance

Finnovation and How It Has Changed Traditional Banking

From mobile applications to blockchain technology, the banking sector and how customers interact with it has changed significantly.

  • 7 min Read
  • May 10, 2024

Author

Escalon

Table of Contents

Technology has introduced AI solutions for finance and banking, and this, in turn, has revolutionized how businesses work, including how they engage with banking services. Convenience has become paramount for organizations, driving banks to embrace technology and finnovation to enhance efficiency and eliminate outdated processes.

Schedule a call today

However, this transformation goes beyond simple automation. Embracing fintech and innovation entails redefining traditional banking practices, integrating digital solutions into operations, and prioritizing customer-centric experiences. Here’s a glimpse into that shift and how finnovation is altering banking. Let’s take a look.

What is Finnovation?


Financial innovation, often called ‘Finnovation,’ represents the fusion of financial services with the technological advancements that help drive transformative change. 

This term encompasses many innovations, including mobile banking, artificial intelligence (AI), process gamification, blockchain technology, and cybersecurity measures like cloud technology.  

The impact of finnovation, machine learning, and AI solutions for finance on the banking industry is profound. It has reshaped traditional banking practices and offered new opportunities to enhance customer experiences while reducing operational costs. It has also changed the way SMEs now operate and navigate the ever-changing financial landscape. Here’s a closer look: 

Here are four ways in which finnovation has changed traditional banking:

 

The Rise of Neobanks:


The emergence of neobanks marks a transformative shift in the banking landscape, facilitated by advancements in financial technology. Neobanks, or challenger banks, operate exclusively online without physical branch locations, offering various banking services through mobile applications and digital platforms. This departure from traditional brick-and-mortar institutions represents one of the most significant moves in banking history.

Talk to us about how Escalon’s FinOps can help you gain financial insights to make informed decisions.

 

In contrast to conventional banks, neobanks provide customers with seamless, efficient, and paperless banking experiences. Not just that, they offer entrepreneurs tech-driven, quicker alternate financing options. We all know that small businesses and startups require capital to thrive. With quicker processing times, less paperwork, and speedy approvals, neobanks help these enterprises meet their needs and experience accelerated growth. Gone are the days of long queues and ATMs out of money; instead, users can manage their finances effortlessly with the tap of a screen. This paradigm shift signifies the convergence of technology and finance, reshaping customer expectations and industry standards.  

Monzo, a UK-based neobank, emulates the success of this model, boasting 7.4 million users and a transaction volume of £33.6 billion as of 2023. This rapid growth underscores the widespread adoption and appeal of neobanks, highlighting their potential to redefine the future of business banking. With fintech paving the way for innovation, neobanks continue to pioneer a future for the financial ecosystem that is more accessible, convenient, and customer-centric.

Biometrics and Banking:


Integrating biometric authentication within banking applications showcases the true paradigm shift within the banking sector. By leveraging facial recognition and fingerprint scanning technologies, banks worldwide are enhancing security measures while offering unparalleled convenience to customers. 

Biometrics provides a vital way for banks to verify their customer identities accurately, significantly mitigating the risks associated with fraudulent activities and cyber threats. Notable institutions such as HSBC and JP Morgan are at the forefront of adopting these advancements, enabling customers to enjoy a secure, seamless, and efficient banking experience. With the rise of chatbots, face recognition, fingerprint access, and voice recognition, customers, as well as businesses, are protected by an additional layer of verification and security. Biometric identification for banking allows SMEs to coat their business finances with an extra layer of much-needed security in order to mitigate digital theft, fraudulent activities, and data breaches. 

Utilizing biometric data represents a pinnacle of finnovation, revolutionizing traditional banking practices by delivering swift and reliable identification methods. This evolution highlights the industry’s commitment to safeguarding customer interests and businesses big and small while embracing cutting-edge technologies to redefine the standards of banking security and convenience. 

Cloud Technology:


The adoption of cloud technology has brought about significant changes, particularly in how the banking sector handles data management and operational efficiency. Banks handle vast volumes of data, and cloud computing offers a scalable and secure platform for optimally generating, recording, and storing this information.  

Cloud service providers ensure robust security measures to safeguard sensitive and confidential data, addressing concerns around privacy and compliance within the banking industry. Banks can streamline their operations by leveraging cloud solutions and reducing significant costs associated with on-premises data storage and maintenance.

While this works in favor of banks, it helps businesses also access all their data in one secure cloud domain. Cloud technology enables firms to have a centralized system where all their important banking and financial data is stored in a cohesive, safe space, which allows easy access to digital documents across the board. This shift to cloud-based storage minimizes the need for extensive physical infrastructure and specialized trained people to manage data. This enables businesses to channel their resources more efficiently into growth activities and strategy-driven tasks. 

Overall, cloud technology, a true testament to AI in banking and financial services, has become a fundamental enabler of scalability and security within the banking sector. It empowers institutions to enhance their competitiveness and deliver and adopt innovative financial services in a dynamic digital landscape.

The Rise of Blockchain Technology:


Blockchain technology has transformed the banking sector and has introduced a secure and transparent method for recording and verifying information and transactions. Blockchain technology employs decentralized, encrypted ledgers, making it exceptionally difficult for unauthorized individuals to tamper with or compromise data. Thus, it enhances cybersecurity and mitigates fraud risks.  

This decentralized approach, a representation of AI in banking and finance, has fundamentally transformed the traditional banking model, eliminating the need for intermediary institutions like correspondent banks. Transactions conducted on blockchain networks can be verified in real-time, streamlining processes and significantly reducing operational costs. This especially helps SMEs improve transparency in transactions and add a layer of trust to their business processes. It also adds an element of traceability across the financial processes, thereby allowing small businesses to mitigate fraudulent activities with ease.

Moreover, blockchain technology has facilitated the creation of digital currencies, enabling swift and efficient cross-border transactions that previously required several days to process through traditional banking channels, an absolute boon for small businesses that are seeking to grow globally. This innovation has empowered customers with instant access to financial services at their fingertips, highlighting the transformative impact of finnovation on modern banking practices.

The Last Word:


The rise of Finnovation has fundamentally altered traditional banking practices. The rise of AI in banking and financial services has reshaped the way businesses navigate banking functions. AI-powered solutions have helped streamline processes as well as optimize crucial decision-making. 

In the world we live in today, businesses can leverage AI to create personalized banking solutions, streamlined transactions, and real-time financial insights. From chatbots that handle day-to-day grievances, face recognition, and biometric recognition to provide added security and advanced analytics that help businesses predict market trends and stay ahead of the curve, finnovation has truly empowered businesses to navigate the financial landscape with increased ease. As technology continues to boom, businesses must realize that embracing and adopting AI and fintech is the only way forward. 

Schedule a call today

Want to know more? Escalon has helped over 5,000 companies across various industries improve their compliance regarding internal controls and streamline processes. Talk to an expert today.

This material has been prepared for informational purposes only. Escalon and its affiliates are not providing tax, legal, or accounting advice in this article. If you would like to engage with Escalon, please get in touch with us here.

Talk to our team today to learn how Escalon can help take your company to the next level.

  • Expertise you can trust

    Our team is made up of seasoned professionals who bring years of industry experience to the table. You gain a trusted advisor who understands your business inside out.

  • Quality and consistency

    Say goodbye to the hassles of hiring, training and managing in-house finance teams. You will never have to worry about unexpected leave of absence or retraining new employees.

  • Scalability and Flexibility

    Whether you’re a small business or a global powerhouse, our solutions scale with your needs. We eliminate inefficiencies, reduce costs and help you focus on growing your business.

Contact Us Today!

Tap into the latest insights from experts in your industry

Accounting & Finance

Navigating Grant Management and Financial Reporting for Biotech Startups 

Biotech startups operate in a unique financial landscape, where securing grants, venture capital, and government funding is crucial for driving...

Read More
Accounting & Finance

Financial Compliance in the Decentralized Era: What Web3 Startups Need to Know 

As the world leans into the decentralized era, Web3 startups are at the forefront, exploring the possibilities of blockchain, cryptocurrencies,...

Read More
People Management & HR

Payroll Services: Streamlining Processes in High-Turnover Consumer Goods Settings 

  Managing payroll can be complicated in any industry, but it becomes especially challenging in the consumer goods sector, where...

Read More
Accounting & Finance

Navigating Payroll for Nonprofit Organizations: Staying Compliant with Grant Funding Rules 

Nonprofit organizations often rely on grant funding to carry out their missions, whether that involves community development, education, healthcare, or...

Read More
Media & Entertainment

Compliance in the Media World: Navigating Intellectual Property and Contracts 

In today’s hyper-connected media landscape, safeguarding intellectual property (IP) and expertly managing contracts are indispensable for success. Media companies—from traditional...

Read More
Accounting

Introducing C3: Your All-in-One Financial Management Platform

Managing your business’s finances can often feel like juggling too many tasks at once, especially when you’re trying to keep...

Read More
Startups

Sourcing Passive Candidates: Strategies for Expanding Your Talent Pool with Outsourcing 

  One of the most valuable sources of talent for startups is the pool of passive candidates—individuals who aren’t actively...

Read More
Startups

Managing Cash Flow in SaaS: Leveraging Outsourced Accounting to Scale Faster 

Cash flow is the lifeblood of any business, and this holds especially true for Software as a Service (SaaS) companies....

Read More
People Management & HR

The Advantages of Outsourcing HR for Nonprofits with Limited Budgets

Nonprofits play a vital role in addressing societal issues, but managing the intricacies of human resources (HR) within the constraints...

Read More