In continuation of my previous week’s blog on Traditional Banking Vs FinTechs , here is an another segment of the market where the FinTechs can disrupt the existing monopoly of the traditional Banks.
Consumer banking: Banks focus on the upper end of the consumer market i.e. the high earners, because banks often can’t make money servicing the majority of consumers. Hence, most consumers feel neglected and, financial institutions need to focus on helping the average consumer and small business rather than the big business.
On the other hand, FinTech startups are developing software that allows them to more efficiently service a much broader range of consumers and still make money. With these new technologies and solutions, FinTech startups will be able to extend banking services to a broad swath of under-serviced consumers who have not been considered desirable customers for lack of adequate credit history. Technology will also enable more consumers to manage their finances online and on mobile devices, regardless of location or time.
The consumer market would appear ripe for a FinTech takeover, but startups will face a number of challenges while building their brands: the high cost of customer acquisition, the balance sheet required for lending, and the intense and intensifying regulatory scrutiny. There is also the growing issue of trust and cyber-security. Consumers are worried about security with some of the new banking services online. Both startups and incumbents need to adopt new technologies to meet the demands of the consumer and to provide adequate security in an increasingly dangerous environment.
Conclusion:The FinTech revolution has thrown the banking sector into turmoil. Banks retain significant advantages and will not easily be supplanted in key segments as long as they move quickly to meet new challenges. On the other hand, they are vulnerable and would do well to recognize this fact sooner rather than later.
References:
https://www.romexsoft.com/blog/fintech-vs-banks/
https://letstalkpayments.com/fintech-and-traditional-banks-a-beginning-of-a-beautiful-friendship/