In the past, transactions between merchants and customers used to take place in the form of gold, silver, cattle, and other physical commodities. Post-1971, the traditional transactions ended when the US and other world fiat systems detached from the gold standard and embraced the floating exchange rates.
However, over the past 50 years, financial systems realized the payment systems built are obsolete with the entities embracing fintech disruptions like virtual currencies, distributed ledgers, and decentralized protocols. Fintech startups are led by Entrepreneurs who are more attuned with the higher expectations of younger generations from around the world. They are more technology-driven and have access to more information with a tap of a phone screen. On the other hand, distributed ledgers have made the system frictionless by eliminating the cross-border payments, remittances and data transfer instant, secure and cheap. This helps in efficient transactions improving the economic activities.
Fintech has improved the real-time settlements for the global companies that must move at speed and securely. The recipients want to settle their transactions quickly in an efficient manner at their fingertips. It’s about being frictionless with moving digital money or data across or within the borders at low cost in real-time.
Major banking institutions have invested hugely in their legacy systems for the payment process. However, these systems are obsolete with the new infrastructure of new banks and payment processors. Financial institutions must now update their design process and systems to meet the cutting-edge innovations and meet the customer simultaneously. This has led to inconvenience to their existing customers in the form of high fees and long delays. The quick way for the banks to resolve the issue is by incorporating tokenization i.e., by leveraging a standard token, the participants can transfer the money or data quickly and efficiently. This method is effective by speeding up the settlements of transfer instructions, liquidation, and payment confirmation at a later date.
Fintech entrepreneurs are successful in eliminating barriers to payments which resulted in greater economic activity and new opportunities for the stakeholders. They are also successful in designing new processes and innovative solutions in the payments industry that let banks give the customers to transact anytime, anywhere.