RESEARCH PAPER RESEARCH REVIEW International Journal of Multidisciplinary

e-ISSN: 2455-3085 | Vol.08 | No.03 | March 2023 | pp. 185-192

Double-Blind Peer Reviewed/Refereed Journal

The Impact of Financial technology on Financial Services: A Comprehensive

Analysis
*Dr. Rajesh Meena

Assistant Professor (vs), Deptt. of EAFM (Faculty of Commerce), Govt. College Dudu, Jaipur

Abstract Article Publication

Financial technology refers to the integration of technology into financial services, Published Online: 14-Mar-2023
creating new opportunities for businesses and consumers. Financial technology
*Author's Correspondence
companies offer a variety of products and services, including online banking, digital
wallets, mobile payments, peer-to-peer lending, and crowd funding. These services are Dr. Rajesh Meena
typically faster, cheaper, and more convenient than traditional financial services, and
they also cater to underserved communities. Financial technology has grown due to Assistant Professor (vs), Deptt. of
technological advancements, changes in consumer behavior, and growing demand for EAFM (Faculty of Commerce),
transparent and efficient financial services. While financial technology has disrupted Govt. College Dudu, Jaipur.
the traditional financial services industry, it still faces challenges such as regulatory
compliance and cyber security risks. This paper provides an overview of the evolution drrajeshmeena.india[at]gmail.com
of financial technology, key players, challenges and opportunities, and future outlook
10.31305/rrijm.2023.v08.n03.022
in financial services. It highlights the impact of financial technology on financial
services, including competition, customer experience, and access to financial services, © 2023 The Authors. Published by
cost reduction, and innovation. It also addresses the regulatory and cyber security
RESEARCH REVIEW International
challenges faced by financial technology companies, as well as the potential for further
Journal of Multidisciplinary. This is an
growth and development. Overall, the paper emphasizes that financial technology has
open access article under the CC BY-
revolutionized the financial services industry, creating new opportunities for businesses
and consumers.
NC-ND license
Keywords: Online banking, Digital payments, Mobile payments, Peer-to-peer (https://creativecommons.org/licenses/
by-nc-nd/4.0/)
lending, Crowd funding, Block chain
Scan and access Online

Introduction
The financial technology (financial technology) industry has disrupted traditional financial services in numerous
ways, and its impact is expected to persist in the future. This research paper covers the evolution of financial
technology, key players in the industry, challenges, opportunities, and future outlook of financial technology in
financial services. Financial technology is the use of technology to improve and automate banking services and
procedures. By introducing new business models, enhancing existing processes, and offering new financial
products, financial technology companies have transformed the industry. These companies often leverage
advanced technologies such as block chain, artificial intelligence, and machine learning to provide innovative
financial products and services that are often faster, cheaper, and more convenient than traditional financial
services. However, financial technology also faces challenges such as regulatory compliance and cyber security
risks. Nevertheless, financial technology has disrupted the traditional financial services industry and created new

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opportunities for businesses and consumers. As technology continues to evolve, financial technology is expected to
continue to evolve as well.

Financial technology, or financial technology, has been rapidly transforming the financial services industry over the
past decade. It involves the use of technology to provide innovative financial products and services to consumers,
businesses, and institutions. Financial technology has disrupted traditional financial services by offering faster,
cheaper, and more convenient alternatives to traditional banking products and services. Financial technology
companies operate in various segments of the financial services industry, including payments, lending, wealth
management, and insurance. They often use innovative business models, such as peer-to-peer lending and crowd
funding, to provide new financial products and services. While financial technology has brought many benefits to
consumers and businesses, it also faces challenges such as regulatory compliance and cyber security risks.
However, financial technology is expected to continue evolving as technology advances and new market
opportunities emerge.

Review of literature
The literature on financial technology highlights the potential for this industry to transform the financial services
landscape, but also underscores the importance of addressing potential risks associated with financial technology.
Regulatory frameworks, cyber security measures, and other risk management strategies will be critical for ensuring
that financial technology continues to drive innovation and improve financial services in a safe and sustainable
manner.

Marroni, L., & Plantin, G. (2021) the financial technology industry has become a rapidly growing sector that has
been changing the financial services landscape. Financial technology startups are utilizing new technologies like
block chain, artificial intelligence, and mobile apps to offer more efficient, convenient, and affordable financial
products and services to both consumers and businesses. This has led to increased innovation and competition,
resulting in improved services and reduced costs for customers and businesses. Numerous researchers have
investigated the impact of financial technology on different financial services areas, such as banking, insurance,
payments, and investment management. They have discovered that financial technology is disrupting the
traditional financial services industry, with traditional banks facing mounting competition from financial technology
startups. Furthermore, financial technology is enabling new entrants to the financial services industry, including
mobile network operators and e-commerce platforms, to provide financial products and services to their
customers. As such, some researchers have argued that traditional financial services firms may need to embrace
financial technology to remain competitive.

Rosengren, E. S. (2019) While financial technology has brought numerous benefits to the financial services industry,
it also poses potential risks. One of the regulatory challenges associated with financial technology is balancing the
need for innovation with protecting consumers and ensuring financial stability. To achieve this balance, some
researchers suggest a flexible regulatory approach, while others propose more stringent regulations to prevent
financial technology firms from engaging in predatory practices. In addition, cyber security risks are another
concern for financial technology companies. Researchers have highlighted potential risks such as data breaches,
identity theft, and financial fraud. Financial technology firms may be more vulnerable to cyber security threats than
traditional financial services firms due to their heavy reliance on technology and large amounts of sensitive
customer data. To mitigate these risks, some researchers propose implementing stronger encryption and improved
authentication methods.

Emmons, W. R., & Ricketts, L. R. (2019) Researchers have investigated the impact of financial technology on
financial inclusion, recognizing that many underserved and under banked populations lack access to traditional

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financial services. Financial technology has the potential to increase financial inclusion by offering new and
innovative products and services, such as mobile payments and microfinance. Nonetheless, some researchers have
advised that financial technology is not a complete solution for financial inclusion and highlighted the importance
of making new financial products and services accessible and affordable for all consumers.

Brief history of Financial Technology

▪ 1950s-1960s: The first credit cards are introduced, beginning with the Diners Club card in 1950 and the
American Express card in 1958.
▪ 1970s-1980s: The first ATMs (automated teller machines) are introduced, allowing customers to withdraw
cash and perform other banking functions outside of bank hours.
▪ 1990s: Online banking begins to gain popularity, with the first fully online bank, Security First Network Bank,
launching in 1995.
▪ 2000s: Mobile banking emerges as a new trend, allowing customers to access their accounts and perform
transactions via mobile devices. The first mobile payments systems are also introduced, including PayPal in
2000.
▪ 2008: The financial crisis of 2008-2009 leads to increased scrutiny of traditional financial services and a surge
of interest in financial technology as an alternative.
▪ 2009: The launch of Bitcoin and block chain technology sparks the development of new digital currencies
and the exploration of new ways to use block chain technology for financial applications.
▪ 2010s: Financial technology startups begin to gain significant traction, with new companies emerging in
areas such as online lending, digital wealth management, and peer-to-peer payments. Investment in
financial technology startups grows rapidly, with over $100 billion invested globally between 2010 and 2020.
▪ In 2015, the European Union introduced the Payment Services Directive 2 (PSD2), which mandated banks to
share customer data with third-party providers. This led to the emergence of new open banking platforms
and services.
▪ In the 2020s, financial technology is expected to continue its growth and evolution, with the development of
new technologies such as decentralized finance (DeFi) and artificial intelligence. Financial technology
services are also being integrated into other industries such as e-commerce and healthcare. The COVID-19
pandemic has further accelerated the adoption of digital financial services as more people shift towards
remote work and online transactions.

Evolution of Financial technology

Over the past ten years, financial technology has undergone significant changes, thanks to the emergence of novel
technologies like block chain, artificial intelligence, and machine learning.
The following are some of the reasons that have fueled the development of the financial technology sector:
1. The first wave of financial technology was focused on providing online banking and payment services, which
allowed customers to access their accounts and make transactions from anywhere, at any time. Peer-to-
peer lending platforms, also known as P2P lending, are online platforms that allow individuals or businesses
to lend or borrow money directly from each other without the involvement of traditional financial
institutions. P2P lending emerged as a new way to obtain loans, with borrowers able to apply for loans
online and investors able to select which loans to fund based on the risk and return profiles. This alternative
form of lending quickly gained popularity, with platforms like Lending Club and Prosper becoming household
names. P2P lending is now a mature industry, and it has expanded to include other types of loans such as
business loans, student loans, and real estate loans.
2. The next wave of financial technology was focused on the creation of digital wallets, mobile payments, and
contactless payments. The ability to conduct deals more quickly and conveniently has completely changed
the way people make purchases.

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3. More recently, financial technology has been focused on leveraging new technologies such as block chain
and artificial intelligence to create new financial products and services. Block chain technology has the
potential to transform the way financial transactions are conducted, enabling faster and more secure
transactions. Artificial intelligence is being used to improve the accuracy and efficiency of financial services,
such as fraud detection and risk management.
4. Another area of financial technology innovation is robo-advisory services, which use algorithms and machine
learning to provide personalized investment advice to customers. This has made investment advice more
accessible to a broader range of customers, as robot-advisory services can offer lower fees than traditional
investment advisors.
5. The financial technology industry has undergone significant disruption in recent years as new technologies
and business models have transformed the way financial services are provided and consumed. Looking
ahead, the financial technology industry is expected to continue evolving and expanding into new areas such
as insurance, wealth management, and real estate. Additionally, we are likely to see increasing collaboration
between traditional financial institutions and financial technology startups, as well as growing competition
from big tech companies such as Google, Apple, and Amazon. As the industry continues to evolve, it will
create both opportunities and challenges for all players, requiring them to stay agile, innovative, and
customer-focused in order to succeed.

Key Players in the financial technology Industry

The financial technology industry is indeed diverse, with various players operating in different segments of the
financial services market. The key players in the financial technology industry include traditional financial
institutions, technology companies, and startups.

1. Traditional financial institutions: These are established banks and financial institutions that have been
operating in the financial services market for a long time. Many traditional financial institutions have
embraced financial technology and are developing their own financial technology solutions to remain
competitive.
2. Technology companies: Technology companies such as Google, Apple, and Amazon have entered the
financial services market, offering innovative solutions such as digital wallets, mobile payments, and online
lending.
3. Startups: Financial technology startups are a key player in the industry, developing new technologies and
business models to disrupt traditional financial services. Many financial technology startups have received
significant funding and are growing rapidly.
4. Payment processors: Payment processors such as PayPal, Square, and Stripe have transformed the way
payments are made, enabling businesses to accept payments online and via mobile devices.
5. Crypto currency and block chain companies: Crypto currency and block chain companies such as Coinbase
and Ripple are leveraging block chain technology to create new financial products and services, such as
digital currencies and smart contracts.
6. Regtech companies: Regtech companies are using technology to address regulatory compliance challenges
in the financial services industry. These companies provide solutions such as compliance monitoring, risk
management, and regulatory reporting.

The financial technology industry is comprised of a range of players, including traditional financial institutions,
startups, technology companies, payment processors, crypto currency and block chain companies, and regtech
companies. These diverse players are actively driving innovation in the financial services industry and are expected
to continue shaping the industry in the future.

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Challenges and Opportunities Posed by Financial technology

Financial technology has presented both challenges and opportunities for traditional financial institutions. Some of
the challenges include increased competition, regulatory challenges, and cyber security risks. However, financial
technology has also presented opportunities for traditional financial institutions, including the creation of new
revenue streams and the improvement of customer experience. Financial technology has disrupted the traditional
financial services industry and has created both challenges and opportunities. Some of the key challenges and
opportunities posed by financial technology are:

Challenges
1. Regulation: Financial technology companies operate in a highly regulated environment, and navigating
compliance with these regulations can be a significant challenge. Compliance costs can be high, and
regulatory uncertainty can make it difficult for companies to plan and implement new products and services.
2. Cyber security: The handling of sensitive financial information makes financial technology companies a
frequent target of cybercriminals. Ensuring the security of customer data and protecting against cyber
threats can be a significant challenge for financial technology companies, and a single security breach can
have severe consequences.
3. Talent Acquisition: Financial technology is a relatively new industry, and there is a shortage of skilled workers
with the necessary technical and financial skills. Financial technology companies may struggle to attract and
retain talent, which could hamper their growth and development. Additionally, financial technology
companies may have to compete with established financial institutions for the same pool of talent.

Opportunities
1. Financial Inclusion: Financial technology has the potential to provide access to financial services to
underserved communities. Online lending platforms and mobile payments can help individuals who lack
access to traditional banking services.
2. Improved Customer Experience: Financial technology companies can offer customers faster and more
convenient access to financial services. Online banking, digital wallets, and mobile payments can simplify
financial transactions and improve the customer experience.
3. Cost Savings: A wider variety of customers may have easier access to financial services thanks to financial
technology firms' ability to provide them at lower costs than conventional financial institutions.
4. Innovation: Financial technology is driving innovation in the financial services industry, creating new financial
products and services that were not previously available. The use of block chain, artificial intelligence, and
machine learning, for example, is enabling financial technology companies to develop new financial products
and services.

While financial technology companies face challenges related to regulatory compliance, cyber security, and talent
acquisition, they also have the potential to expand financial inclusion, improve the customer experience, reduce
costs, and drive innovation in the financial services industry.

The impact of financial technology on financial services

1. Disruption of Traditional Financial Services: Financial technology has disrupted traditional financial services
by introducing innovative products and services that are faster, cheaper, and more convenient.
2. Increased Competition: Financial technology has increased competition in the financial services industry by
offering new alternatives to traditional financial services.
3. Improved Customer Experience: Financial technology has improved the customer experience by offering
faster, more convenient, and personalized financial services.

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4. Expanded Access to Financial Services: Financial technology has expanded access to financial services,
particularly to underserved communities, by offering online banking, mobile payments, and digital wallets.
5. Lower Costs: Financial technology has lowered the costs of financial services by eliminating the need for
physical branches and reducing overhead costs.
6. Innovation: Financial technology has driven innovation in the financial services industry, creating new
financial products and services that were not previously possible.
7. Regulatory Challenges: Financial technology companies face regulatory challenges due to the highly
regulated nature of the financial services industry. Compliance costs can be high, and regulatory uncertainty
can make it difficult for companies to plan and implement new products and services.
8. Cyber security Challenges: Financial technology companies face cyber security challenges due to the
sensitive nature of the financial information they handle. Ensuring the security of customer data and
protecting against cyber threats can be a significant challenge for financial technology companies.

Disruption

Cyber security Increased

Competition

The impact of
Customer
Regulatory fintech
Experience
services

Expanded
Access to
Innovation Financial
Services
Lower Costs

The impact of financial technology on financial services has been significant, with disruption, increased
competition, improved customer experience, expanded access to financial services, lower costs, and innovation.
However, financial technology companies also face regulatory and cyber security challenges that need to be
addressed.

Future Outlook of Financial technology in Financial Services

Financial technology is expected to continue to grow and disrupt traditional financial services in the future. The
future of financial technology is likely to be shaped by advancements in technology, changing customer
expectations, and regulatory changes.
Financial technology is expected to continue to transform the financial services industry in the future. The following
are some of the key trends and future outlook for financial technology in financial services:
1. Continued Innovation: Financial technology will continue to drive innovation in the financial services
industry, particularly in the areas of block chain, artificial intelligence, and machine learning. This will enable
the creation of new financial products and services, such as decentralized finance (DeFi) and open banking.
2. Expansion of Digital Banking: The COVID-19 pandemic has accelerated the shift towards digital banking, and
this trend is expected to continue. More customers are expected to use online banking, mobile payments,
and digital wallets to manage their finances, which will create opportunities for financial technology
companies.

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3. Increased Collaboration: Financial technology companies and traditional financial institutions are expected
to collaborate more closely in the future. Traditional financial institutions will leverage financial technology
solutions to enhance their digital offerings, while financial technology companies will benefit from the
established customer base and regulatory compliance of traditional financial institutions.
4. Focus on Customer Experience: Financial technology companies will continue to prioritize the customer
experience, offering faster, more convenient, and personalized financial services. This will be achieved
through the use of customer data analytics and artificial intelligence.
5. Growing Importance of Cyber security: As financial technology continues to grow, cyber security will become
even more critical. Financial technology companies will need to invest in robust cyber security measures to
protect customer data and prevent cyber attacks.
6. Increasing Role of Regtech: Regtech solutions will become even more important in the future, as they help
financial technology companies comply with regulatory requirements. This will reduce the regulatory burden
on financial technology companies and allow them to focus on innovation and growth.

The future outlook for financial technology in financial services is bright, with continued innovation, expansion of
digital banking, increased collaboration between financial technology and traditional financial institutions, focus on
customer experience, growing importance of cyber security, and increasing role of regtech.

Conclusion
The financial technology (financial technology) industry has disrupted traditional financial services in numerous
ways, and its impact is expected to persist in the future. This research paper covers the evolution of financial
technology, key players in the industry, challenges, opportunities, and future outlook of financial technology in
financial services. The study concludes that financial technology has the potential to transform the financial
services industry, and traditional financial institutions must adapt to remain competitive. Financial technology has
significantly affected the financial services industry, disrupting traditional banking and investment models, and
creating innovative growth opportunities. Financial technology has also improved convenience, transparency, and
accessibility in financial services, especially for underserved populations. Financial technology has encouraged
collaboration between traditional financial institutions and financial technology startups, resulting in the
development of new products and services that benefit consumers and businesses. Nevertheless, financial
technology has also introduced new risks such as fraud, data breaches, and regulatory uncertainty. As the financial
technology industry continues to grow, it is essential to balance innovation with consumer protection and stability
in the financial system. The impact of financial technology on financial services is anticipated to continue to be
significant as the industry adapts to evolving consumer needs and expectations. Financial institutions can position
themselves for success in the rapidly changing modern finance industry by embracing financial technology and
working to mitigate its risks.

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Author’s Biography: _______________________________________________________________________

Dr. Rajesh Meena, Ph.D., M.Com., MBA, NET, is an eminent academician with an experience of 6+
years. Presently, he is working as an assistant professor (vs) at Govt. College Dudu, Jaipur. He has
published more than 25 research papers in reputed international and national journals and
presented more than 15 research papers at national and international seminars and conferences.
He also has six years of teaching and research experience. He is also a committee member for
conferences, seminars, and workshops. His main research work focuses on finance, management,
economics, and business.

How to Cite this article? _____________________________________________________________________

Meena, R. (2023). The Impact of Financial technology on Financial Services: A Comprehensive
Analysis. RESEARCH REVIEW International Journal of Multidisciplinary, 8(3), 185–192.
https://doi.org/10.31305/rrijm.2023.v08.n03.022

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