Why Banks and Fintech Firms Should Team Up Rather Than Compete With Each OtherWhile the numbers quoted until now suggest that banks do have something to worry about, truth is that traditional financial institutions continue to be widely used and profitable. However, this doesn’t mean that the existing banking network isn’t flawed. This is why banks need to collabarate with Fintech companies.
Traditional banks all over the world have always been part of a legacy industry that still follows age-old practices and techniques. With digital disruption becoming commonplace in every industry vertical today, it was only a matter of time before banks were forced to clean up their acts.
Findings from the Global Fintech Report 2017 suggest that almost 90% of global banks are concerned about losing revenue to Fintech firms.
In fact, these financial innovators are growing in such a fast-paced and profound manner that the global Fintech industry is currently valued at USD867 billion. Some of the main drivers of this growth include technological advancements, regional regulatory oversights, and increased customer demand for better banking processes.
While the numbers quoted until now suggest that banks do have something to worry about, truth is that traditional financial institutions continue to be widely used and profitable. However, this doesn’t mean that the existing banking network isn’t flawed.
What are the Two Main Challenges That Banks Currently Face?
Firstly, banks are bound by a number of regulations and pre-determined processes that have been in place for quite a while. Although these processes may have worked to date, they do restrict banks from adopting new ways and innovations.
In addition, a majority of banks aren’t very flexible when it comes to offering solutions that are more user-friendly or convenient.
How Financial Technology Companies and Banks can Help Each Other
For starters, here’s a big reason why Fintech is trending – almost half the people who use digital services for finances do so because of easier access to a wider range of products while having a seamless online experience.
Financial technology firms also use new ideas, agile infrastructure, and cutting-edge analytics to reinvent current banking processes for increased efficiency and convenience. This facet of Fintech is particularly useful as most banks have a huge network of loyal customers, plenty of resources, and a good hold over existing regulatory policies.
To begin with, Fintech firms have better and quicker access to a large amount of data. Consequently, they happen to be more nimble in the way they work. In such a situation, if a bank partners up with the right Fintech company, it can get up-to-date knowledge about existing as well as potential customers.
Armed with the latest information, banks can now tailor their products to be in line with their customers’ expectations. It can also determine what products add value and improve them while doing away with those products that no longer cut it.
Secondly, banks can become more flexible in the way they approach any financial service. With the backing of a Fintech firm, banks can implement disruptive solutions that are more user-friendly in nature. These solutions can also be focused on underserved customers.
Thirdly, back-end banking processes that take an eternity and consume plenty of resources can be finished in double-quick time with the help of financial technology. Fintech firms also have much to gain by partnering with a traditional banking institution. Banks offer the financial stability that’s much needed for any technology start-up.
With a sufficient amount of support, Fintech firms can continue doing what they do best – coming up with new, innovative, and disruptive digital solutions to existing problems. These firms can also gain access to new market segments with the right banking partner.
With robo advisors and virtual assistants being a big part of the financial services industry, it’s pretty much clear that digital revolution is well underway. Truth is that financial technology does have the power and the potential to undermine the role and relevance of traditional banks.
However, it also has the potential to help banks come up with better, quicker, and more economical working processes as well as new business models to make them more competitive in the long run.