On March 5th, 2017, some of the UK’s biggest fintech firms had to suspend their services after customers were unable to make payments. This was due to a technical failure from their third-party payment processor used to connect to the Mastercard payment network. Many fintech firms rely on third-party processors to connect to payment networks, rather than building their own systems to save money. Traditional banking institutions, however, directly connect to payment networks, and their advantage is system stability.
Fintech firms using third-party processors do not have control over how fast a glitch is fixed, and they cannot provide customers a time-frame for when the issue would be corrected. By using third-party processors, fintech firms are more likely to encounter an outage.
To stabilize systems, fintech firms should directly connect to payment networks. While it would increase costs, customer satisfaction and loyalty might increase. Having a stable system is necessary to retaining customers, which drives the firms’ success. Due to the large economy of scale that is required to build a direct payment network, I believe that only a few fintech companies would have the resources to do so. Thus, they will become the bigger market players.
Reference: http://uk.businessinsider.com/fintechs-need-to-go-solo-2017-3?r=US&IR=T&utm_content=buffer339b5&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer