Financial Technology’s Disruption of Traditional Banking Systems in Developing Economies

Abstract

FinTech has established itself as a disruptive technology, especially in developing countries, thereby affecting the banking sector. FinTech has brought about changes to the sector through technologies like mobile payments, blockchain, artificial intelligence (AI), and machine learning (ML). Technologies such as AI and digital payments have received a high rating (9/10) because of their ability to personalize services and make transactions better. Blockchain technology and smart contracts (8/10) have introduced another layer of security and decentralization into the financial ecosystem, while ML and RPA have helped optimize operations.  FinTech innovations disrupt the traditional financial sector, but also help create an inclusive society offering financial services to those who lack access to banks. Innovations such as artificial intelligence and blockchain technology have helped increase financial transparency and reduce costs. However, the introduction of AI and blockchain technology presents challenges, including cybersecurity concerns and regulatory challenges, especially in developing countries. In response to technological advancements, the financial industry is implementing digital innovations and collaborating with traditional banks and FinTech firms. While technological development is still ongoing, some obstacles exist, including adapting existing procedures and regulations. Financial services offered at relatively low costs through FinTech innovations have led to more competition and financial inclusiveness in areas where traditional banks are non-existent.