Fintech doesn’t disrupt banks, it makes them platforms
Fintech is growing at a fast rate year on year. With the expectation of making large returns, financial firms are spending much of their money on technology to improve customer service and efficiency. What we all come to know is that Fintech companies offer the same old things that banks did for centuries but in a more effective and efficient way. It is the unlikely event of the disruption of banks as of fintech. That is due to the fact that banks are also well placed to be adaptable to technological innovations and do old functions in new ways. Having realized the benefits, the collaboration between fintech firms and legacy banks is occurred to contribute innovative solutions and remarkable customer experiences through the digital technology.
From the perspective of some senior bankers around you, they believe that the fintech firms will significantly influence on the future area of banking. Some think that the market share of fintech will be the same as the banking market. There is no doubt for me that banks will still have a strong position in the market as well as the fintech will grow higher.
There are several reasons why Fintech doesn’t disrupt banks.
The health of traditional institutions can be improved by Fintech when banks start to see fintech as a beneficial tool for enhancing performance and promoting profitability.
An opportunity for enhancing loan portfolio diversification is what provided by fintech firms.
With the great partnership with fintech, matters like credit card processing, transferring money and processing loans can easily be carried out. Furthermore, traditional financial institutions can be benefited by securing network and manage the time to get tasks done quickly and easily without any effort.
A notable quality of fintech is data enrichment. Fintech data can provide the traditional institutions an insight that the activities of how customers spend their money. This is one of the advantages provided by the partnership with fintech.
Further, banking services as payment processing, credit card transaction and deposit taking need of more secure technology infrastructure. By collaborating with fintech, banks can concentrate on creating customer experience and service at the same time fintech startups can leverage the technology infrastructure of the partner bank.
These reasons strongly prove that fintech and traditional banks are not enemy at all and it is not as you think.
More and more companies start to adopt the technology to apply in their financial services for managing better financial aspects of their business. In this case, banks are used as a platform where companies can build their applications using the bank’s data. The data and services of these banks are used as a platform to interact with customers. If banks are able to adopt the technological development, there are great opportunities to expand their business. MicroMoney focused on micro-financing in the money lending industry is to provide the best solution to individuals and small enterprises for meeting their financial needs. MicroMoney acquires new customers by using big data and credit record bureau on blockchain where credit records, personalized data and depersonalized data are kept. Big Data collected by MicroMoney may provide business value for banks and MFIs to be beneficial for e-commerce, telecom, and insurance industries as well. The data at MicroMoney’s disposal helps to facilitate access to a new audience, segment potential customers by interests, and effectively target consumer offers. Thus, for my point of view, the business gets an opportunity to reduce risks, and MicroMoney customers receive more advantageous consumer offers. Banks are using extensive budgets to attract and verify their customers. For MicroMoney, the cost of acquiring 1 reliable borrower is just $1 and banks can buy credit records from Credit Bureau using tokens of MicroMoney.
A great wealth for fintech firms is the banks. Banks should collaborate and learn from the success of fintech startups. There is a strong relationship that can benefit both fintech firms and banks. The future of banking is directly proportional with the technology. The potential of fintech is to upgrade financial services not through competitions but through cooperation. Therefore, the statement that I want to prove is that the firms of fintech do not intend to kill of the traditional banks but it will surely innovate the existing systems of banks through collaboration.