Have you ever seen a sci-fi movie filled with bold ideas on new technologies? Of course, you have! We’re also pretty sure you took part in numerous heated debates on whether time travel and other similarly implausible things are actually possible. What does it all have to do with the fintech and payment industries, you might ask? Well – quite a lot, as it turns out.
The fintech sector is very extensive and has a long history. It all began when the credit card was invented in the 1950s. The beginning of 2013, however, completely changed how fintech is perceived. The fintech revolution brought about entirely new and modern ideas on banking and payments. You can easily pay for, say, a veggie burger with your mobile phone, now armed to the proverbial teeth with different payment methods. Also, it’s all incredibly simple and straightforward.
Three things have contributed the most to fintech’s spectacular success: the simplicity, speed and security of transactions.
Not that long ago, most banks competed with other financial institutions, treating them like their worst enemies. Today, however, innovations, global economy and increasingly more important new technologies are all having a worldwide impact on the payment industry.
KPMG’s report clearly shows that investments in fintech are growing year by year.
It seems that banks and financial institutions have traded competition for collaboration, all to their benefit and bigger market shares. As a matter of fact, more than 82% of banks intend to partner with fintech companies in the nearest future.
Such cooperation between various fintech startups and banks may be very profitable, yet there are some downsides to this as well. Let’s discuss some possible drawbacks.
When there is nothing to lose, but a fortune to gain…
First, fintech is innovative, agile, keen on simple solutions, customer-centric and cool. On the other side of the spectrum are banks – traditional, well-organized, trusted and respected. Cooperation between these two allows both parties to learn from each other in order to forge a strong alliance. Unfortunately, different workplace cultures and approaches can ruin even the strongest and most promising partnerships. The synergy between trainers and smart suits may not necessarily work out.
Second, this is a relatively new phenomenon for banks and other established financial institutions. Some of these might be rather skeptical about – not to say afraid of – such joint efforts. Fintech companies were founded on the basis of simple regulatory requirements, which is why there are so many payment processing services fighting for their piece of the proverbial pie.
Third, big powerhouses in the likes of Google, Amazon, Apple or Facebook have enough resources to come up with their own financial solutions. This could pose a major threat to banks and fintech startups’ combined efforts. “Banks and fintech firms must cooperate to confront the challenge from huge tech companies,” said Anthony Wooley, the Head of Group Innovation for Societe Generale in the UK.
When it comes to such joint ventures, transparency and willingness to adapt, cooperate, share data and restructure accordingly should always come first, as they might help improve services and grow revenue. Financial institutions can also use these to mitigate at least some of the challenges posed by their intense expansion and the diversity of the system they are functioning in.
There is plenty of opportunities for banks and fintech companies to benefit from co-existence
Fintech businesses and banks share their customer base, which can potentially increase the number of clients for both parties. For example, the former can offer the latter innovative solutions such as online wallets, easily accessible via mobile phones, all to the benefit and increased convenience of their customers. Partnerships between banks, payment providers and fintech companies blossom, and they all have something to learn from each other. The only point of contention would be their individual goals, which might differ in the longer run.
It’s crystal clear that banks and fintech companies will want to go hand in hand when it comes to climbing the financial hill. This can mean starting on opposite sides, but it’s always better when someone’s got your back.
All in all, do you happen to have too much money on your hands? Don’t know what to spend it on? How about investing it in fintech?
Want to know more about payment and e-commerce trends? Check out our dedicated series of articles on the G2A PAY blog.