Traditional banks have been around since the 14th century and have had a good run until now. However, the onset of new-age financial technology (fintech) firms has taken the financial world by storm.
So, how have banks responded to the arrival of fintech companies? Do they see them as unwanted intruders? Are they willing to collaborate with fintech companies to pave the way for a better banking experience for consumers?
This article provides answers to these questions and takes you through some of the key reasons why banks should partner with fintech companies.
Beginning of the Fintech Era – What to Expect?
Fintech companies have acquired substantial market shares that previously belonged to banks explicitly. That being said, many fintech firms are actively scouting for collaboration opportunities with established banks.
Fintech companies are predominantly startups that do not have a lot of resources when compared to banks. However, they have a grip on new technologies and innovations. This is exactly why around 65% of credit unions and banks have agreed to enter at least one fintech partnership in the past three years.
One may wonder what value lies in the collaboration of fintech firms and banks. The answer is pretty straightforward – this collaboration has the potential to address the challenges of both parties. While fintech companies have expertise in new technologies and innovations to improve the overall banking experience for the masses, banks have the masses on their side.
Therefore, traditional banks and fintech companies have the right mix to lay the foundations of the financial sector suitable for the next generation.
Why Should Banks Tie Up With Fintech Companies?
Today, businesses across all industries are either on the path to embracing digital transformation or already serving their customers digitally. Banks that have conventionally remained slow to adopt new technologies have identified the need to spruce things up by partnering with fintech companies. The blend of new technologies provided by startups and the banks’ rich and diverse financial expertise would open the floodgates to a new, secure, and modern banking era.
Here are a few reasons why banks should join forces with fintech companies:
Leveraging Tech Innovations
There is a considerable technology gap between fintech companies and banks. Partnering with fintech companies would mean that banks can deploy technology systems that are not bound by legacy. Partnering with fintech companies addresses age-old challenges within the traditional banking system ecosystem.
With new digital solutions and development, fintech companies have the potential to transform the current state of banking. All in all, fintech companies can help traditional banks fill the huge technology gap and, most importantly, revamp the bank’s existing tech architecture.
Curating New Products and Services
Fintech firms have the knowledge and expertise to develop customer-centric products and services. Their offerings can play an important role in improving the status quo of traditional banks.
Many fintech companies have rolled out niche solutions such as buy-now-pay-later (BNPL) for mainstream customers. Such solutions appeal to the younger and more tech-savvy population. Looking at how inactive traditional banks have remained in the past to roll out tech-driven solutions, it is safe to say that the entry of fintech companies would do more good than harm.
Saving Time and Resources
Time is money. Ironically, banks spend countless hours debating whether they should buy or build technology in-house. Today, these debates prove to be very counterproductive as many fintechs can provide the required technology and solutions to banks at affordable rates. Thus, when banks partner with fintech companies, they need not worry about discovering new ideas and innovations. Fintech firms lift that burden off their shoulders.
Thus, implementing new technology or building a tech stack is cost-effective and much faster when banks partner with fintech firms. Leasing technology rather than developing it in-house offers banks more flexibility to reject a course of action if it is unsuitable or does not align with its requirements.
Facilitating Cloud Banking
Cloud technology or cloud computing largely means that you can access and save your data on the internet instead of a hard drive. This enables you to access your data irrespective of your location, device, or time as long as you have a working internet connection.
Just like any other sector, banks save large volumes of customer data and banking details on their hard drives. However, things have taken a turn for the good with the arrival of cloud technology. Many banks have tied up with fintech firms that provide cloud-based services and solutions to store data. It is a win-win situation for both the banks and customers. Banks do not have to worry about erasing or losing customer data, and customers can access data from any place at any given time.
So, the main question is whether fintech companies complement the growth of traditional banks. The answer is yes. The offerings or product portfolios of most fintech companies can transform the services of traditional banks and take them to a whole new level.
With an increasing focus on digital transformation across the banking sector, banks cannot ignore what fintech firms bring to the table. Partnering with fintech companies has multiple benefits, and many banks have recognized the same.
At present, many banks have joined hands with fintech firms, and those who haven’t are exploring this possibility. If banks want to remain relevant, stay ahead of the curve, and acquire new customers, they should collaborate with fintech companies.
By partnering with a fintech company like Finezza, you can avail a wide range of brilliant solutions and leverage the new age technology. Finezza offers services like streamlined loan management, document identification, and KYC processing. Contact us today to know more!