Impact of fintech innovations on traditional banking.
Author: Tejas Navnath Nilange
Literature review :
1) Effect
Kaushik, P. U. (2024) aims to examine the impact of financial technology (FinTech) on the conventional banking industry. A systematic literature review was carried out on publications between 2010 and 2023 to determine the effect of innovations such as mobile banking, blockchain, and artificial intelligence on banking organisations. The results show that FinTech increases convenience for consumers, minimises expenses, and brings about new ways of offering banking services. At the same time, it poses challenges like cyber threats, legal issues, and the reduction of physical bank outlets. The conclusion reiterates that FinTech not only acts as a disruptor in the banking industry but also as a partner in the digital transformation journey.
2) Disruption
Agrawal, S. S., Rose, N., & PrabhuSahai, K. (2024) explores the impact of artificial intelligence (AI) on conventional banking and financial services. Through a literature review and case study analysis, this paper explores the application of AI technologies such as machine learning, chatbots, and predictive analytics in transforming the customer experience. The results show that AI technology improves personalisation, speeds up decision-making, lowers costs, and improves fraud detection, but also faces challenges such as data privacy issues, regulatory vacuums, and the risk of over-reliance on technology. The conclusion emphasises that AI technology is both a disruptor and an enabler, forcing banks to change and requiring responsible governance to make AI technology sustainable in the financial system.
3) Impact
Siek, M., & Sutanto, A. (2019, August) discusses the manner in which fintech innovations are transforming the conventional banking sector in Indonesia. In order to analyse this, the researchers used quantitative research techniques such as hypothesis testing and regression analysis, using a sample gathered through convenience sampling. The research focuses on payment fintech’s and peer-to-peer (P2P) lending platforms and their effect on customer behaviour and banking activities. The findings show that payment fintech’s have significantly disrupted banks since 2015, mainly because of their strong value propositions for customers, including discounts and wide networks of merchants, which have improved customer satisfaction. On the other hand, P2P lending has not yet created significant disruption, as customers are still wary about their safety and reliability. The implications of the study suggest that conventional banks must act quickly by adopting a customer-centric strategy and embracing digital approaches in order to stay competitive against nimble fintech startups.
4) Friends or Foes ?
Navaretti et al (2018) examines the impact of Fintech innovations on the traditional banking industry. The researchers conduct an analytical study of digital innovations and technology-based business models to understand whether Fintech inspires a sense of new opportunities for banks or challenges the existing frameworks of banks due to increased competition and disintermediation. The conclusion reached by the researchers states that Fintech has the potential to enhance access to financial services and increase competitive pressures, forcing existing banks to rethink their value chain, product offerings, and risk management. The implications of the study suggest that banks need to develop new strategies and transform themselves through digital innovation to survive in a Fintech-enabled world. Overall, the study contributes to the existing body of knowledge on how Fintech is transforming the financial industry and the future of banking models.
5) Conflict
Shi, J., & Wang, Y. (2023) investigates the impact of the emergence of financial technology (FinTech) on the redefinition of the traditional banking system. By conducting a literature review, the researchers discuss the concept of “channel conflict” between FinTech companies and traditional banks. The results show that FinTech companies accelerate the digital transformation process through hyper-scaling and new user experiences, while traditional banks show a slower pace of adoption due to existing infrastructure and regulatory issues. The conclusion argues that FinTech acts as both a disruptor and a catalyst in the financial industry, pushing it towards higher levels of digitisation and innovation. The blending of traditional banking with FinTech collaboration is considered a key factor in promoting a technologically advanced financial system.
6) Resilience
Boustani, N. M. (2020) investigates how traditional banks can survive and adjust in the face of increasing competition from FinTech start-ups. The paper uses a model based on behavioural and innovation theories and is validated through structured interviews with banking experts and officials, as well as quantitative analysis to determine the positioning of FinTech companies and their impact on the banking industry. The results show that FinTech companies disrupt the traditional financial environment by rearranging payment and debt structures, providing more efficient services, and increasing customer choice. At the same time, banks face challenges in the form of regulation, technology, and reputation, such as sustaining customer trust. The paper concludes that in order to retain competitive viability, banks need to innovate, partner with FinTech companies, and readjust their strategic thinking to reconcile efficiency with resilience in the rapidly changing financial environment.
7) Collaboration
Sharma, P. (2024) investigates the relationship between FinTech startups and conventional banks to establish whether they are competitors or collaborators in the financial industry. Using a qualitative approach to research, this paper explores existing literature to explain the relationship between innovation-driven startups and conventional banking institutions. The results show that FinTech startups are disrupting conventional banking by providing faster and customer-centric digital solutions, while at the same time offering opportunities for collaboration and partnership. The thesis concludes that the future of financial services will be shaped more by partnerships than by competition, with conventional banks using the innovation of FinTech startups to stay relevant in the industry and FinTech startups benefiting from the size, reputation, and expertise of conventional banks.
8) Stability
Safiullah, M., & Paramati, S. R. (2024) examines the influence of the fast growth of fintech companies on the financial stability of conventional banks. Using panel data and econometric analysis, this paper empirically examines the relationship between the growth of fintech companies and the sensitivity of banks to risk. The results show that the growth of fintech companies can both improve efficiency and raise competition, but also pose new challenges, especially in the areas of liquidity and credit risk. The results of this paper have implications that, while fintech companies are a positive force in innovation and customer service, there is a need for regulators and banks to adjust to the new reality in order to reduce systemic risks. In general, this paper contributes to the understanding of the wider context of digital change in the financial sector, highlighting the dual nature of fintech as both a driver of innovation and a source of new challenges for the banking sector.
9) Disruption
Elia, G., Stefanelli, V., & Ferilli, G. B. (2023) discusses the role of fintech in the banking industry, highlighting the trends and challenges that have been brought about by the advent of financial technology. The authors of the article carried out a systematic literature review of 377 articles indexed on Scopus between 2014 and 2021 to identify the development of fintech and its impact on digital banking. The article concludes that the advent of fintech has caused a dramatic shift in the banking industry, which has impacted customers, businesses, financial institutions, regulatory bodies, and society as a whole. The article has identified six key aspects of the impact of digital banking, which include efficiency, customer service, innovation, and regulatory issues, among others. The article suggests that fintech is both an opportunity and a threat, as it promotes innovation and inclusivity while also causing concerns about financial stability and regulatory issues. The article provides a systemic view of the impact of fintech on the banking industry, suggesting directions for future research.
10) Inclusion
Kamal, M., Rahmani, S., & Alam, M. R. (2025) discusses the ways in which fintech innovation is changing the face of financial inclusion and access in India. Using a conceptual and analytical framework, the authors explore the impact of fintech platforms in providing banking services to the unbanked. The article concludes that fintech companies have significantly increased accessibility, lowered transaction costs, and improved convenience for customers, but have also created challenges for regulation, cybersecurity, and digital literacy. The findings of the article suggest that fintech is a major enabler of inclusive finance, but its growth needs to be balanced with strong regulatory frameworks and consumer protection policies. In summary, the article sheds light on how the Indian banking sector is being transformed by digital financial innovations and how the unmet needs of financial access are being redefined by fintech innovation.
Conclusion:
FinTech innovations have significantly impacted the conventional banking industry, acting as both disruptors and enablers. On the one hand, FinTech innovations have enhanced customer convenience, minimised transaction costs, ensured wider financial inclusion, and enabled the use of sophisticated technologies such as mobile banking, blockchain, and artificial intelligence, which have further improved personalisation, fraud detection, and banking efficiency. On the other hand, they also create significant challenges, such as cybersecurity threats, regulatory issues, reputation risks, and the possibility of jeopardising financial stability due to liquidity and credit risks. Conventional banks, which are sometimes hindered by their outdated infrastructure and slower adoption rates, face growing competitive pressures from nimble FinTech startups that provide customer-centric solutions. However, the existing literature clearly suggests that the future of banking lies not in competition but in cooperation, where banks can harness the power of FinTech innovations to transform their offerings, and FinTech companies can tap into the strength, reputation, and knowledge of conventional banks. In the end, FinTech innovations trigger a digital revolution that forces banks to re-strategise, collaborate, and strike a balance between innovation and resilience, thereby creating a more inclusive, efficient, and technology-savvy financial environment.
References:
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