This is The Way That Fintech Innovation is Changing The Financial Services Industry: The Importance of Leveraging New Technologies

Fintech Innovation

In recent years, the provision of financial services is achieved with the increased use of financial technology. The so-called FinTech Innovation. New technologies such as artificial intelligence, machine learning, application programming interfaces (APIs), and distributed ledger technology (DLT), have changed the way businesses work. This shift leads to new business models with new processes that have a significant impact on the financial sector.

Banks can take advantage of new technologies to offer new product capabilities, improve the way they interact with their customers or other businesses, find alternative sources of funding, and improve their internal processes.
At the same time, the fintech development dynamic is generating changes in the behavior of consumers. They are gaining easy and fast access to digital applications as well as new services and products. This increased capacity of access to digital channels is now served by a higher number of new entrants. Fintech start-ups provide fast, accessible, and easy-to-use solutions for their customers, thus improving the customer banking experience. This customer-centric approach makes them more flexible and offers their competitive advantage compared to the traditional players in the financial services market.

The new fintech ecosystem and the emergence of neobanks

The so-called fintech neobanks are currently well integrated into the U.K and U.S. payments systems. They play key roles in the progress of banking technology development. These include facilitating back-end check processing; enabling card issuance, processing as well as providing customer-facing digital payments software. They also play important roles in capital markets and in providing financial advice and execution services to retail investors.

The fintech expansion is currently progressing in Europe. According to the report of the International Monetary Fund (IMF), Europe is among the least developed regions. The analysis in the report is made in terms of mobile money penetration and Asia-Pacific and North America fintech lending. None of the Big-tech companies, which currently dominate the global fintech ecosystem, originated from Europe, and Big-tech lending lags far behind the global front-runners. However, Europe leads in terms of internet coverage. Until the COVID-19 pandemic, new venture capital fintech investments in Europe have been growing rapidly. However, the gap with the frontier region of North America remains very large. (IMF)
Through fintech innovation, access to financial services has increased. At the same time, the demand for tech jobs has skyrocketed. It has contributed to the development of a financial system that is safer, more efficient, and more impactful. Countries that did not have access to credit have improved the financial inclusion of their citizens. Africa, which used to have a huge unbanked population, is now turning into a leading innovator in the fintech transformation of growing countries.

Fintech Innovation Strategy
But which country is turning into a Fintech Leader in the European Ecosystem?

Lithuania enjoys the title of the fastest-growing fintech innovation hub in the European Union. The country is managing to lead the frenetic transition to digital banking. The Baltic country, whose financial system is dominated by traditional SEB Bankas and Swedbank, took its first steps into fintech four years ago. What exactly did Lithuania do? The absolute basics: It simplified and accelerated the licensing process for electronic-technological banking companies, covering all 27 countries – members of the European Union. Four years later, the results are quite impressive. Lithuania is ranked 4th worldwide in the fintech ecosystem rating table, while it “figures” in 1st place in Europe, in terms of the growth rate of the sector.
Part of the frenetic pace of growth is based on new consumer habits as a result of the pandemic, as large numbers of consumers turned to online shopping.

However, the high rates are also attributed to some “revolutionary” digital banking companies, such as Revolut. Due to Brexit, those start-ups “moved” from the United Kingdom to the shores of the Baltic. At the moment, the share of transactions managed by fintech companies stands at an impressive 27%. A year earlier, it did not exceed 11%. The central bank, which is responsible for granting operating licenses, has registered more than 130 companies shaping the Lithuanian fintech landscape i.e. companies that leverage technology to offer banking services.

Of course, this rapid expansion, which is expected to continue into 2021, does not come without risk.“Can we avoid risk? We can expect some mistakes, but if you want to achieve something, you have to take the risk. For the time being, I am quite satisfied,” declared the central banker, Vitas Vasiliauskas, shortly before leaving his post on April 7.

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