The truth is that, for the last few centuries, traditional banks have been the anchor of all economic systems, providing security, loans, and financial advice to individuals and businesses. Today, fintech companies have rewritten all these rules by entering the scene shaking the very foundations, and transforming fast, low-cost, customer-friendly substitutes for traditional bank services. It has revolutionized banking: from enabling instant personal loans through smartphone applications to the outright replacement of wealth managers by robo-advisors, fintech has made banking faster and more accessible.
But does this doom the traditional banks?
Why Fintechs Win Hearts
Fintech companies are the most suitable players to recognize what customers need nowadays. Most leverage big data and artificial intelligence with really beautiful mobile interfaces to offer hyper-personalized services. Need a loan approved in 5 minutes? Fintech can do it. Want to split bills with friends immediately? Payment applications, such as Venmo or Paytm, are already doing this. Traditional banks lag behind the speed of fintech which is held up with its obsolete IT systems and bureaucracy.
Furthermore, fintechs cater to underbanked millions of users from developing nations with smartphones but not bank accounts. The outreach enables the fintech companies to scale swiftly without physical branch burdens.
Tide Is Not Turning Against Traditional Banks Yet
Fintechs have their heads to keep above water. Most of these players are sustaining themselves on thin margins and live on venture capital cash, seriously unsustainable in the long run. Regulations also are tightening globally, and with central banks and governments growing wary of the instability that can be created by entities lightly regulated by the government, these do not place much hope in the future.
Traditional banks possess strong competitive advantages:
Rather than treating fintechs as threats, banks should embrace them as catalysts to modernization. A few banks with a bright digital future have started adopting:
Discussion Questions:
Will fintechs ultimately replace the traditional banks, or are both simply destined to co-exist in addressing different needs in the marketplace?
Are they too lenient or too strict when it comes to fintech companies?
As a banking professional or customer, what would you want to see from traditional banks to make them more competitive?
Brings you into this discussion, which touches every money saver, borrower, or investor!
But does this doom the traditional banks?
Why Fintechs Win Hearts
Fintech companies are the most suitable players to recognize what customers need nowadays. Most leverage big data and artificial intelligence with really beautiful mobile interfaces to offer hyper-personalized services. Need a loan approved in 5 minutes? Fintech can do it. Want to split bills with friends immediately? Payment applications, such as Venmo or Paytm, are already doing this. Traditional banks lag behind the speed of fintech which is held up with its obsolete IT systems and bureaucracy.
Furthermore, fintechs cater to underbanked millions of users from developing nations with smartphones but not bank accounts. The outreach enables the fintech companies to scale swiftly without physical branch burdens.
Tide Is Not Turning Against Traditional Banks Yet
Fintechs have their heads to keep above water. Most of these players are sustaining themselves on thin margins and live on venture capital cash, seriously unsustainable in the long run. Regulations also are tightening globally, and with central banks and governments growing wary of the instability that can be created by entities lightly regulated by the government, these do not place much hope in the future.
Traditional banks possess strong competitive advantages:
- Deep trust with customers especially in the crisis time.
- Knowledge of regulations that involve highly regulated sectors like mortgages and corporate lending.
- A wide portfolio of services that these days involves more than most fintechs offer.
Rather than treating fintechs as threats, banks should embrace them as catalysts to modernization. A few banks with a bright digital future have started adopting:
- Co-branding with fintech companies to offer co-branded retail products.
- Investing in AI-powered customer service chatbots.
- Migration to cloud-based solutions from obsolete core banking systems.
Discussion Questions:
Will fintechs ultimately replace the traditional banks, or are both simply destined to co-exist in addressing different needs in the marketplace?
Are they too lenient or too strict when it comes to fintech companies?
As a banking professional or customer, what would you want to see from traditional banks to make them more competitive?
Brings you into this discussion, which touches every money saver, borrower, or investor!
