Much has been said and writtenabout the impending doom of banking, as customers begin to flock over to Fintech products and services. However, the claim that Fintech will kill banking is still an overstatement. Banking, as we know it, is changing because of Fintech, but it would take a major event of cataclysmic proportions to do away with banking institutions.
That said, the disruption of the financial services industry is real. Until very recently, banks had an uninterrupted monopoly over banking, financial, commercial, loans and investments. Not anymore. Gone are the days when people are comfortable dealing with just a single entity for all their financial needs. People simply aren’t happy with how their banks treat them and have become increasingly receptive to new solutions.
Banks have had a hard time to win back customer trust even if it’s been nearly ten years since the rumpus that was the 2008 financial crisis. This is even partly the reason why Fintech is able to enter the picture and offer services that poached users away from banks. As banks got stuck firefighting the crisis and dealing with regulation, tech was able to focus on innovation and launch products and services that became integral to people’s lives. Smartphones are arguably more valued by people over their wallets.
Enter the Fintech firms, who unbundled the services offered by banks and even fused them together to be their verticals, focusing on simplifying the experience for users. It’s this expertise in delivering convenience and that makes Fintech appealing.
Take investments, for example. People had been quite averse to the idea of investing – only 52 percent of Americans own stocks. Despite campaigns encouraging people to invest, many 18- to 34-year-olds have yet to dip their toes into it. This became opportunities for apps like Acorns and Betterment to offer simplified ways for people to invest using their smartphones. Other segments, such as personal finance, lending and payments, are becoming saturated by new Fintech services.
Banks are reacting differently to this disruption. Some, like Santander, support incubation in hopes of cultivating their own game-changer. Some like BBVA and Goldman Sachs are leveraging their size and assets to simply just buy out companies. Some like Bank of America and JPMorgan Chase have partnered up with tech players to improve on their tech capabilties.
There is plenty of opportunity for traditional banks and Fintech to co-exist. Take the case of UK business funding firm Ezbob. The company initially aimed to disrupt lending by providing loans to SMEs through its platform. Ezbob streamlined the otherwise lengthy loan approval processes of traditional institutions. Last year, it white labeled the platform to banks and now RBS is among its latest users.
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