The initial reactions of banks toward fintechs were quite similar. However, below is a hand-picked collection of interesting Fintech statistics in 2019 provided by Fortunly to give you an idea of how the Fintechs have already changed the market and what the future may hold.
- A huge chunk of incumbent financial institutions (88% of them) believe that part of their business will be lost to standalone fintech companies in the next five years.
- Fintech companies acquired $111.8 billion globally in investments in 2018 alone.
- Digital banking services took over 46% of people by exclusively providing digital channels for their financial needs.
- Loan origination in digital lending was $41.1 billion in 2017, a 30.1% year-on-year growth.
These are just a few stats which indicate that interest in fintechs, and the threat from them is real, and current.
The limitations of traditional banks
Banks have their own strengths. This includes being in the business for hundreds of years, and having relations with and access to customers and their data. However, they are immobilised by legacy systems, oppressed regulations, and an inability to explore the true potential of emerging technologies because of lack of expertise and cultural boldness regarding change.
This has afflicted them with inefficient delivery systems leading to huge costs and dissatisfaction of customers. Their inability (and to a certain extent unwillingness) to explore emerging technologies had resulted in lack of innovation. In the same way, banks lag behind fintechs in coming up with new products and services, capturing new customers, and creating new markets and customer bases.
Fintechs: Their manner of working, and their strengths
Fintechs embody emerging technologies into their culture and use it to address the inefficacies in the financial services industry. They utilise innovation to improve products and services at a low cost to attract customers to their services, and away from the banks. Customer experience is at the heart of all their plans.
Also, Fintechs are unconfined from most government regulations and legacy infrastructures. This allows them to keep their processes agile, and efficient. They are better at leveraging emerging technologies to create innovative products, services, and ways to interact with customers, consequently providing an engaging experience for the customers. As a result, customers move away from traditional players, and toward their contenders.
Real Life Examples
Telkom Kenya fills a void where people lack access to traditional banking services by introducing banking on the go with their new product T-kash Mobile Money; allowing them to transact money, withdraw cash, pay utility bills, buy goods and services etc. It’s estimated that nearly 1.7 billion people worldwide are without bank accounts. And now, thanks to Fintech, all you need is your Phone.
In the same way, VP Bank e-wallet solutions makes use of mobile technology that enables customers to deposit and transfer money by simple SMS or message, sparing them the hassle of having to visit a bank branch, open an account, and perform transactions.
Meanwhile, TerryWhite Chemmart is committed to ensuring that every Australian has easier access to pharmacists and expert health advice every day, through high-quality, accessible, and cost-effective community based healthcare services and programs online.
And Leap In! helps individuals with disabilities under the NDIS scheme receive the appropriate insurance coverage they need, by connecting them with insurance providers, and community groups who support them, all in one delightfully simple place with their unique digital-based platform.
Traditional Banks and Fintechs unite
As fintechs continue to make inroads, banks have started to protect their turf. And fintechs face their own obstacles, which includes funding, scaling up, and accessing customers. Banks offer financial plans, access to customers, and data, while Fintechs bring in ideas, drive, culture, and tech savvy. This type of collaboration is a win-win. It allows banks to obtain new technologies, create new products, solutions, and services. And fintechs benefit from access to customer data, which they can utilise to improve their products and provide a higher quality service.
Banks are also forming alliances with integrated platform providers that help execute emerging technologies to upgrade their legacy infrastructures to new infrastructures, while they continue to do business as usual. This allows traditionally technology-antagonistic financial service providers to become technology-enabled and intelligent enterprises that offer new products, solutions, and services.
As traditional banks and fintechs continue to collaborate, they have an opportunity to open up an ecosystem of smart enterprises, with more enhanced infrastructures, that offer customers better products, services, and solutions—which is transforming this stormy relationship, into a friendship that benefits everyone.