Traditional Banking Vs FinTechs

The financial services sector is bracing itself for an unprecedented period of disruption. Innovations such as smartphones, big data analytics, and the blockchain technology that underpins Bitcoin, are forcing banks, insurers, and Wall Street firms to adapt to an unpredictable future where some of the old rules no longer apply.

The FinTech revolution accelerated with the new regulations enacted in the wake of the 2008 financial crisis, which made certain lines of business less profitable for banks and created an opening for startups leveraging big data, new communications modalities, and other tools to serve more tech savvy consumers. At first, banks began trying to develop many of these technologies themselves in a bid to keep up with their rivals. But as the pace of innovation has accelerated, banks have found it harder and harder to do everything at the pace, volume, and scale required.

In order to assess which side will come out as a winner, it’s important to understand the core segments of the market.

SMB banking: After the 2008 financial crisis, heavy regulations were imposed on the banks, making it much more expensive to service SMB customers. This led traditional banks to pull back from this segment, creating a lack of available financial tools and resources for SMBs. Also, majority of surveys conducted recently state that small businesses face all kinds of barriers when applying for loans and other financial services in the U.S. FinTech startups have rushed into this void, offering more efficient technologies and tools for lending, payments, operations, underwriting, cybersecurity, know your customer, regulations, compliance, asset management, and more. This trend is expected to continue for new market leaders to be born in this category. The SMB market is the segment in which nimble FinTech companies are most likely to displace large banks.

 Corporate banking: Banks will be wise to invest in this segment. Not only must they double down to remain competitive against rivals, but it is an area where startups will face the highest barriers. While some startups are likely to attack these segments, they are much less likely to be successful due to the complexity of the products and services, the need for large balance sheets, the regulatory scrutiny, and the ongoing strong relationships banks enjoy with their major customers.

to be contd…

https://www.romexsoft.com/blog/fintech-vs-banks/

https://letstalkpayments.com/fintech-and-traditional-banks-a-beginning-of-a-beautiful-friendship/