It is apparent that Fintech is transforming the financial sector by making use of technologies like AI and digital payments. Fintech startups, especially, have been making influential changes in this industry with the innovation they bring to the table and the ability to attend to the ever-demanding customers of the 21st century as compared to traditional banks.
Gosh, does that spell the end for banks?
Not quite. Though Fintech churns out solutions to problems that occur with traditional banking and has many benefits of bank digitization, it is still hard for them to override the significance of traditional banks.
There are a few reasons to this, among others:
1. There is a deep trust placed in banks which Fintech have yet to achieve as banks have established their presence since the olden days;
2. The relationship banks have with customers. This relationship can only be fostered with time, which is relatively still out of grasp for Fintech companies as of now;
3. People have faith in banks to handle complicated tasks;
4. Some services require customers to be there in person and physical signatures;
5. Banks provide a sense of continuity that digital banks cannot achieve yet.
Why is Fintech appealing to the modern customer?
1. They incorporate conventional banking approaches with the latest digital technology- giving the customers the best of both worlds. When we don’t need to pick one out of two options, it makes our lives significantly easier and isn’t that what we all wish for?
2. Customers are able to get loans from peer-to-peer lending platforms which do not require them to set foot into a bank. Asset management solutions are also provided by robo-advisory platforms- and it is most notably way cheaper than traditional financial services.
3. Customers being able to save cost on banking services are just one of their many demands in this day and age. Fintech takes the cake as they utilize technology so that services can be provided quicker and with greater security. Consumers need not worry about spending hours in a bank just to get a simple thing done.
4. Fintech manages make their mark in the financial world thanks to millennials as these customers are way more demanding with greater expectations where Fintech is able to cater to their needs. Having a product or service online definitely appeals to them more than the usual brick and mortar approach.
5. Customers are able to enjoy efficient and streamlined services such as transferring money, lending and trading without the hassle of traditional banking.
6. Customers expect technology to be able to keep up with their needs- instant money transfer overseas, one-click processes, personalized experiences, and most importantly- that everything can be performed through mobile devices. Fintech caters to customers’ demands as people are able to easily take control of their finances with ease and convenience.
With the problems left behind (thanks to COVID), banks face low profitability. Digitalization will accelerate after the pandemic. Possibilities are still limited with conventional banking and customers’ demands are left unmet- which created opportunities for Fintech organizations to swoop in with their cutting-edge technology.
Fintech can be seen as the millennial of financial services with traditional banks as boomers. Banks are not as fast paced nor able to adapt as quickly as Fintech. In order to survive, banks are now turning to Fintech startups to create products to help improve user experience and the overall performance of banks.
Fintech startups are able to gain customers’ trust when they partner with banks, while also acquiring insights that banks get from mergers and acquisitions. The partnerships will also be beneficial to banks as they will be getting the technology expertise needed to stay afloat in this era of Fintech. They need to focus on customer satisfaction and offer fast-paced services. They are benefitting from each other’s existence rather than fighting over the dominant spot in the market.
“Fin-Tech and banks need a cultural reconciliation: risk appetite and tolerate trial and errors” – Hugues Delcourt
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