In the world of finance, we have seen many new technologies that reshaped everything from transactions to implementation and fiat currencies to virtual currencies. A decade ago, people wondered when banks and financial organizations introduced debit/credit cards and ATMs for conducting transactions and withdrawals.  

However, with cutting-edge technological advancements, one can manage funds and facilitate transactions whenever they need with some limitations through smartphones, thanks to FinTech and its respective applications. Fintech is one of the fast-growing sectors and all digital payments which you are conducting on the Internet today are due to the implementation of financial technologies. That’s why Fintech development and traditional banking are always the talk of the town in the finance sector. 

On the contrary part, the clash between Fintech development and traditional banking has become a pivotal discussion. This blog will delve into what sets these two financial approaches apart, exploring their respective pros and differences.  

So, let us begin this article with an interesting section.  

What is Fintech development?  

Fintech development is the ultimate process of creating highly responsive fintech products with all the necessary attributes and core functionalities. The term Fintech directly refers to finance and technology. Fintech software development solution comes with innovative technology to deliver financial services efficiently.  

Fintech development involves the creation of software and other technologies to enhance as well as automate the delivery of financial services and products. Developing fintech software empowers business owners, product owners, and consumers to manage their finances and business workflow.   

Financial technology can be accessible through computers, Laptops, or other smart devices such as smartphones or tablets. With world-class fintech development services, financial institutions and banks can easily track the user’s transactions, holdings, and other aspects without hassle.  

Pros of Fintech development  

Here is the list of advantages startups and business owners can yield by utilizing fintech development service.  

1. Innovation and agility are highly possible in fintech software development.  

1. Fintech software development constantly explores new technologies, such as blockchain and artificial intelligence to create cutting-edge financial apps, solutions, and websites. 

1. Developing fintech software helps business owners to avoid the high costs associated with maintaining physical branches.  

1. With fintech development, you can offer intuitive interfaces and personalized services to your consumers.  

1. Fintech development has the potential to bridge the gap in financial inclusion by reaching all places traditionally underserved by traditional banks.  

1. Launching a fintech application enables access to financial services for individuals without easy access to brick-and-mortar banks. 

1. Fintech development leverages data analytics to make data-driven decisions. This allows for accurate risk assessments and personalized financial offerings based on user behavior. 

1. Fintech allows users and business owners to access financial services on a global scale. This global reach enables cross-border transactions and investments. 

You can gain all these perks by investing in the best-in-class fintech app development service in Australia. 

What is Traditional banking? 

Traditional banking refers to the established banking model where financial services are provided through physical branches. This model has been in existence for centuries and has been the primary means through which people, organizations, government, and business owners manage their finances. 

Pros of Traditional Banking 

1. Traditional banks are synonymous with stability and trust.  

1. The physical presence of brick-and-mortar branches reassures customers and provides a sense of security for those unfamiliar or uncomfortable with digital platforms. 

1. Traditional banks offer a wide range of financial services under one roof, from savings accounts to mortgage loans.  

1. Traditional banks foster personalized relationships between customers and relationship managers. This human touch provides comfort and assurance for complex financial matters. 

1. Banks have a deep understanding and experience in navigating complex regulatory environments.  

1. Banks have long-standing reputations built over decades or even centuries. This history contributes to a bank’s credibility and reliability among customers. 

Hope you have some ideas about fintech development and traditional banking. So, let us have a look at the core differences between fintech and traditional banking. 

Differences between Fintech development and Traditional banking 

Both fintech and traditional banks primarily focus on offering reliable financial services for the customers. Let us delve deeper into the key differences between fintech development and banks.  

1. Infrastructure

The first and foremost difference is infrastructure. Fintech solutions typically rely on modern, cloud-based, and API-driven infrastructure. By utilizing cutting-edge technologies like big data and AI, FinTech software development can provide a unique and better experience for customers. To be precise, fintech app development is an optimal choice for startups and business owners, as it allows for simplifying complex financial procedures and enhances public access in no time.   

On the flip side, traditional banks often operate on legacy systems, which can be less adaptable to rapid technological changes. Due to this reason, traditional banks cannot craft new products or offer the latest financial services to customers. Based on the above statements, fintech has the ideal infrastructure compared to banks.  

2. Customer interaction

The second significant difference between them is customer interaction. Fintech is primarily digital, which emphasizes online interfaces and mobile apps. We know that Fintech companies work virtually, so customers or platform users don’t need to physically be present to leverage financial services or conduct financial transactions. This makes fintech app development a convenient option for financial institutions and business owners.  

Fintech companies offer 24/7 access, remote account opening, and better communication with customers. When it comes to traditional banking, banks involve physical branches and in-person interactions. To open a bank account, you must usually be physically present. Furthermore, not all banks use modern technology to verify your identification online. This makes traditional banking less convenient for prospects, which leads to an unpleasant experience.    

3. Decision-making speed

Fintech development employs streamlined processes and a flat organizational structure, which enables quick decision-making. Whereas traditional banking may have a more hierarchical structure, which slows down decision-making processes.  

4. Regulations

Regulating Fintech development and traditional banking involves distinct challenges. Fintech companies operate without a single overarching regulator, contributing significantly to the surge in fintech startups. Conversely, traditional banking adheres to stable, prudential regulations focused on financial stability, deposit insurance, and Anti-Money Laundering (AML) & Know Your Customer (KYC) compliance.  

While Fintech thrives in regulatory areas, Traditional banking’s regulatory landscape prioritizes systemic stability, which reflects the different risks inherent in each sector. 

5. Risk appetite

Fintech companies will typically be more willing to take calculated risks. Also, fintech companies will experiment with new technologies and business models. Traditional banking tends to be more risk-averse by prioritizing stability and long-term sustainability.  

6. Cost structure

As already stated, Fintech can operate without physical branches. So, fintech companies can operate with lower costs due to the absence of physical branches. However, in the case of traditional banking, banks will incur higher operational costs associated with maintaining physical infrastructure.  

These are the six Key differences between fintech and banking. Next, let us see. 

Fintech development vs Traditional banking – A Tabular comparison  

The Future of Fintech Development and Traditional Banking 

The future of finance lies in the collaboration between Fintech development and traditional banking by recognizing and capitalizing on the strengths of each approach. Let us discuss them in the following points. 

1. Fintech and traditional banking can collaborate to integrate technological advancements into the traditional banking framework. This integration may lead to the development of more efficient and customer-friendly services. 
2. Regulatory bodies are likely to adapt to the evolving financial landscape, which finds a balance that encourages innovation by ensuring consumer protection and data security. 
3. The emergence of hybrid models, combining the digital strengths of Fintech with the stability of traditional banks, could become a prevalent trend. This may involve traditional banks incorporating digital enhancements into their services or Fintech firms obtaining banking licenses. 

Closing thoughts 

In the finance world, the synergy between Fintech development and traditional banking is not a battle but an opportunity. As technology advances, these two forces can coexist and complement each other. As a result, both fintech and banks provide consumers with a diverse, efficient, and customer-centric financial ecosystem. Whether it is innovation-driven fintech or trust-infused traditional banking, the future will be shaped by a collaborative approach that leverages the best of both worlds. The winners in this transformation will be the consumers, who stand to benefit from a financial landscape that meets their needs in an ever-changing world. 

If you are a product owner or a CEO planning to build or scale your fintech product, we got you covered. Fortunesoft is a trustworthy Fintech development company in Australia, and we have a pool of experts to create Fintech software with peculiar attributes by leveraging cutting-edge technologies. Being an early bird in the software development industry, we offer splendid fintech software development services to CXOs, product owners, startups, enterprises, and businesses of all sizes at a reasonable cost.