By using innovative digital platforms to provide fast and accessible financial services, Fintechs have provided a challenge to the established financial institutions. Consumers increasingly expect to be able to manage their finances wherever they are. Although the main players in the financial world have recognised this demand, old legacy IT systems and entrenched business practices place them at a disadvantage in an area that develops rapidly. Fintechs provide services such as loan approvals within minutes and cheaper international money movements, core banking procedures.
Consumer Driven Approach
With 30% of consumers indicating they plan to increase use in non-traditional financial companies, the potential loss of revenue for established banks and insurers could be significant. In the same report by PwC, 82% of traditional institutions said they plan to increase collaboration with Fintechs over the next 3 to 5 years. They will look to tap in to the advanced analytics and real time digital delivery Fintechs can offer. All this is driven by the consumer experience, and the Fintech platform delivers more of what the modern day consumer expects.
Two Way Street
Yet this is ultimately a collaboration between the start-ups and the established businesses. For all their digital advantages, the Fintechs lack the capital to make inroads in to acquiring the customer base the established businesses enjoy. Those also have the advantage of brand name. Collaboration would be mutually beneficial, though it is perhaps inevitable that some of the main financial names will acquire Fintechs over the coming years.
Whether through partnerships or acquisition the banking world will continue to face the challenge of keeping up with digital advances. AI and biometrics are just two areas that could be significant and tech companies such as Google and Amazon may become the next main rivals to the established financial world.