For a long time, consumers have put up with the lackluster technology at their traditional banks. However, with fintech on the rise, banks are finding it difficult to compete and offer customers the cutting-edge innovation they now demand. Online and digital banking are ever-increasing in popularity as a way of doing your banking. With so many new companies coming up every day, fintech has emerged as a new set of technologies that have the power to challenge the incumbent financial services. In this blog, we’ll discuss about the key differences between banks and fintech companies.
Difference Between Fintech & Traditional Banking:
Fintech is the future of banking and finance. It’s a technology-driven, data-centric approach to doing business that is changing the way the world thinks about money. Neobanks in India are giving tough competition to the traditional banks and winning.
Fintech companies are rapidly disrupting traditional banking with their innovative business models, more efficient processes, and low-cost products. And they’re making it easier than ever to send money abroad, invest in cryptocurrencies and make payments instantly.
But what exactly makes fintech companies different from banks? Here are some key differences:
1) Fintech companies focus on technology as a core competency. Banks rely on technology as a means to an end.
2) Fintech companies are primarily focused on serving consumers. Banks serve customers and shareholders first, then individuals as well as businesses.
3) Fintech companies offer more affordable services than banks do because they don’t have to maintain branches or pay for expensive infrastructure like ATMs or call centers. They also don’t have any legacy systems holding them back from innovation like banks often do (think outdated software).
4) Fintech companies leverage artificial intelligence (AI) and machine learning algorithms to improve their operations and personalize customer experiences even further than traditional banks can do it today.
5) They are more flexible in terms of their offerings and can adapt quickly to changing market trends or consumer demands.
Why Fintech is Growing
During the first few months of COVID-19, we saw a significant increase in the use of mobile banking channels – anywhere from 20-50%. And even as things begin to go back to normal, it’s predicted that this trend will continue. Consumers are demanding a more flexible digital banking journey, one that isn’t so linear. They want to be able to move seamlessly between channels and devices, and they want their banking experience to be more personalized. Fintech provides this and much more.
Fintech companies are growing so quickly because they offer new products and services that were not available before. For example, online loans are much more accessible than traditional bank loans because you don’t have to go into a branch to get one. Another common example is peer-to-peer lending platforms that allow anyone to lend money directly to another person without involving a bank or any other intermediary party.
Will Fintech and Traditional Banking Coexist?
Traditional banks are used to competing with other financial institutions for customers. They already do so in traditional markets such as retail banking, wealth management, insurance, and payment services. But they have never competed against other types of companies that provide financial services, such as peer-to-peer lending platforms or mobile-only banks.
The rise of fintech companies has changed this competitive landscape completely. The lines between traditional and non-traditional financial services providers have blurred, and the competition between them has intensified. Financial institutions have always competed with each other, but now they are also competing directly with fintech firms that offer innovative products and services that consumers want to use. However, there are also many partnerships between fintech firms and traditional banks, which makes it easier for us to say that fintech firms and traditional banking can easily coexist.
Final Thoughts
Looking at the current challenges, we are definitely beginning to see a shift in the way financial institutions do business. There is a much need for change, and that change seems to be led by fintech. Innovative and new companies are looking at the inefficiencies of our financial system and ways to improve it. Instead of using outdated methods, they rely on new technologies such as mobile banking and artificial intelligence to enhance the customer experience. The growth potential here is massive.
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