Recently, we have witnessed an immense amount of investment being poured into the fintech industry. A decade ago, much of the literature within the fintech space focused purely on fintech companies entering and disrupting the financial world. Furthermore, as customers begin to flock over to fintech products and services, much has been said and written about the impending doom of banking. However, the claim that Fintech will kill banking remains an overstatement. The banking sector, as we know it, is changing because of fintech, but this industry being wiped out entirely due to fintech disruptions is not on the cards anytime soon.
Though it has been nearly ten years since the infamous financial crisis of 2008, banks are still having a hard time winning back customers’ trust. This is partly the reason why fintech companies were swiftly able to enter the picture and offer services that poached users away from banks. As banks got caught up firefighting the crisis and dealing with regulations, fintech companies were able to focus on innovation and launch products and services that became integral to people’s lives. Fintech companies unbundled the services offered by banks and even fused them together to simplify the user experience. To stay in line with the growing popularity of financial technology, top banking sector companies are building innovative in-house technologies in response to the increasing fintech challenge. However, there’s plenty of opportunities for traditional banks and Fintech to co-exist. Here is why we think companies in the banking sector and fintech should collaborate and not compete:
Growing innovation in fintech
Fintech companies offer a plethora of products and distinctive solutions for consumer demand. Due to the availability of ample data and technological capabilities, fintech companies have gained significant traction in terms of attracting customers. In the wake of such advanced facilities, traditional methods of banking look obsolete and outdated. This is one of the main reasons why it is high time for banking sector companies to join hands with fintech firms rather than locking horns with them. Collaboration between the two sectors will ensure sharing of technological-know. This way, banks can improve and revamp the services that they offer and thereby reduce customer attrition.
Rising customer awareness
The number of tech-savvy and digitally active consumers are on the rise. Which means that the number of customers becoming aware of the technological advancements in fintech is also growing. This puts banking sector firms under immense pressure to save themselves from losing out on customers to fintech companies. In fact, a recent survey shows that the number of consumers choosing fintech services for payments and money transfers has risen from a mere 18% in 2015 to 50% in 2017. If not stay ahead of the curve, getting technical assistance from the fintech companies will help banking sector companies to stay relevant in the market.
Collaboration between the banking sector firms and fintech companies is a win-win situation for both the parties. For startups in the fintech sector, partnerships with financial institutions and banks will provide access to the necessary funds for future growth. As far as banks are concerned, such partnerships would mean access to a data-driven approach with lesser costs, low redundancy, solid technical know-how, and increased efficiency. Furthermore, companies in the banking sector can significantly reduce their structural costs, provide employees more time for value-added tasks, and enable enhanced regulatory compliance.