Fintech has been the centre of hype in the recent past with most of their focus being what traditional banks are doing wrong. This has been the reason why fintechs have continued to attract gigantic investment, with $31 billion being injected into the sector last year. However, the truth is that many banks are still doing many things the right way, and fintech startups can learn from them. Here are some areas where fintech’s prerequisites and banks’ expertise connect:
Dealing proactively with the law
Compliance with financial regulations can be a challenge while scaling up. For example, in the US, even where startups do not chase full banking charters, they often have to apply for other licences on a state-by-state basis. The same applies in Europe, where countries deduce European laws locally, building a complex business environment for the big players.
Approaching risk holistically
Fintechs prioritise customer convenience more than managing risk. The sector’s value is based entirely on its ability to say yes in situations where traditional banks would say no. This enables more people to take loans and open checking accounts more than ever before. Fintechs also put a premium on growth, meaning that turning down a potential client due to credit risk becomes painful, but vital for sustainable development.
Partnerships to acquire clients
Though financial startups offer customers more accessibility and lesser fees, acquiring new customers might not be necessarily easy. Consumers are more risk-averse on financial products than on social media. Being the new kid on the block will not always work to a fintech’s benefit.
The future does not have to come at the peril of traditional banks. Indeed, they have many resources and expertise to offer. Fintech firms and banks need to learn from them and work together to help the finance ecosystem grow.