The banking sector is an essential industry for businesses and consumers but is known for being slow at implementing change. There is a growing number of financial service providers, and consumers expect their banks to adapt and reshape at a faster pace.
According to current statistics from the Small Business Association, the number of small businesses in the US is currently 31.7 million compared to 30.7 million in the previous year. The continued growth in business numbers, and the changes these enterprises have faced over the last two years, have increased the need for banks to change. Businesses expect their banks to speed up the way they handle credit relief measures, help with business refinancing, and complete business payments and receipts transactions.
Business vs Consumer Banking
Interestingly, small businesses make up 99.7% of employers in the US, and they have the same needs as other bank users. Whether they are doing their business or personal banking, they expect ease of use across all their banking applications and easy access to all their banking services. However, businesses also have other concerns because they often need to maintain multiple accounts with multiple users, they need efficient domestic and international money wires, better security, and efficient compliance.
Creating an LLC in the US today is far easier than most people imagine. Incorporation Rocket makes it easy for every budding entrepreneur to start a business. Every LLC needs a reliable bank that can make it easy to transact, offers security, and easy access to finance when needed.
Reshaping the Banking Sector
Meeting the demands of their consumers, most banks are already moving fast in their innovation of the products and services they offer. The banking sector knows that the more innovative they are, the better positioned they will be to meet the expectations of their consumers while increasing their revenues.
Unbundling of the Banks
Much like department stores, banks expanded to offer as many services as they could in the last two decades of the 20th century. However, today’s consumers have all the services available at their fingertips and expect value, convenience, and social conscience from their financial providers.
FinTech now holds a larger number of personal loans than banks and dominates the business payment sector (PayPal, Stripe, and Square). Consumers now have more choices in how to organize their banking services around their lifestyles.
Decentralizing the Financial System
Blockchain technology is another force holistically helping to reshape the finance sector by decentralizing it. That means it is doing away with the middleman, allows instant access to loans, improves the interest on assets, and instant transactions.
The technology makes transactions cheaper, faster, and seamless, both for the industry and its consumers. One example: Companies where mortgages originate entirely on blockchain reduce the costs of loans by up to 2% and reduce the cash required to close. As these banking institutions become more commonly used, they promise more people access to homeownership and business loans.
While talking about blockchain, digital currencies are increasingly popular and are considered mainstream in many countries. In the US, banks, large investors, and over 60 million Americans own some assets in digital currencies, while some are testing the ground with Stablecoin (cryptocurrencies pegged to normal currencies). Therefore, banks are exploring blockchain options to improve all their operations.
Banks need to make themselves more accessible to their consumers by reaching out to them when they are looking for certain products. Since consumer data shows that people do not easily change their banking providers unless they are dissatisfied or offered something better, banks are increasingly using the technology available to them and are using personalized messages to reach out to consumers as they are looking for services. This is the type of holistic strategy that allows banks to benefit from a digital strategy.
Keeping Up with Social and Digital Transformation
All banking institutions, no matter their size, must ensure that they remain committed to sustainable environmental, social, and governance practices. This sustainability requires a financial commitment if they are to offer sustainable finance.
The digital transformation has meant that more and more people are doing business and banking online, whether on a computer or mobile device. The fintech industry must ensure security solutions that keep pace with these transformations.
One danger for fintech is that the pace of innovation may be slowed down by the regulatory and compliance regulations that are already in place, and those that will inevitably follow.
The banking sector is reshaping faster than ever before, ensuring it is prepared to meet the demands of its consumers. Blockchain and other technologies are the tools that have allowed banks to broaden their services, making sure they offer fast, seamless, and cheaper banking services.