There is a common belief that banking sector is fading away due to the burst of fintech solutions and companies that provide financial software development services. However, it is unwise to see it as a threat coming from technological innovations. Fintech is neither a competitor nor a rival but a way to improve a traditional banking and all related activities. Banks are increasingly adopting fintech because it allows them to improve their business performance and enhance the customer experience. And financial technology gives banks a competitive advantage. So, how exactly is fintech changing banking and what do we – ordinary consumers – gain from this transformation?
Less cash and paper
The world’s biggest banks made attempts to fight this trend but the cryptocurrency avalanche overwhelmed them. It does not mean that they will trade Bitcoin or Ethereum tomorrow, but they will definitely do this sooner rather than later. In fact, such famous giants as Barclays, UBS, HSBC, and others plan to build a streamlined payment mechanism based on blockchain technology. For customers, this means using settlement coins that represent flat collateral-backed currency, which, in turn, is unlikely to default. In the long run, cashless operations will expel transactions with paper money. The use of paper for reporting, accounting, checking and other back-office operations will also decrease.
Do you remember the good old days when we went to branch offices, stood in queues (without ticket systems), and had a face-to-face conversation with a bank officer to get some service? It is most likely that your children won’t have this experience in the future. Fintech tools provide numerous capabilities online that preclude the need for physical visits to banks. Currently, leading banks bet on closing traditional branches and implementing online customer service tools. This trend is beneficial for both parties since financial institutions reduce rent costs and payroll, while clientage can use their time more efficiently.
Bank as a marketplace
Wouldn’t it be great to have access to multiple products represented by versatile providers accumulated in your bank? In other words, banks turn into marketplaces of banking, financial, insurance, and other products. Such open banking ecosystems are designed for digitally savvy clients who prefer to hold the keys to their financial status and, the most important thing, to do this online. The new era of finance management where customers can find, compare and pick the product in a single place is almost there.
It is unlikely that you will be able to get a BA degree in finance using your mobile banking app, but you can expand your knowledge of budgeting, finance management, investment and other issues. Banks are developing personal finance applications that are just as user-friendly and helpful as your favorite Mint money manager. Personal finance apps created by banks will be accessible to more people and will invoke some curiosity about how your money works and provide useful mechanics on how you can improve your financial health. Increasing financial literacy is definitely a benefit.
Facilitating online payments is another benefit we get with the fintech invasion of the banking sector. Customers can enjoy a multifaceted tool to pay for versatile goods and services. Moreover, banks’ cooperation with third-party providers allows for different payment options via financial services built atop bank infrastructure. As a result, you are able to make payments from any place throughout your online activity like messengers and social accounts…and even make order/pay your restaurant bill before your arrival onsite.
Partnership instead of perishing
Banks view or should view fintech startups as a way to drive change. Anyway, those financial establishments that opt for a partnership with technological advances are likely to remain in the market rather than be pushed out. A conservative approach that envisions neglecting and even struggling against digitalization is a straight road to obsolescence. Banks are less flexible than most of the fintech ventures, which offer more affordable and convenient solutions for SMBs and individuals. At the same time, successful collaboration is possible when both parties are aware of their own merits and flaws to mutually fill each other’s gaps. Banks and fintech are two parts of one puzzle. If properly attached, they complement each other. If they don’t, the whole picture won’t come together.
The Future of Traditional Banking = ?
You might have encountered Bill Gates’ opinion about the necessity of banks. According to Microsoft’s founder, society can do without dinosaur banks, but banking is what we need. In this sense, technology is the power that is shaping the future of the banking sector.
Banks are gradually moving toward fintech to improve their entire operating cycle from front to back-office operations. With that said, the future of traditional banking equals mutually rewarding cooperation between fintech and banks and better financial services for everyone.