Fintech companies and banks: competitors or cooperation partners?

Published: 24.05.2018.

The financial environment of today is changing rapidly and there is an ideological clash of business values and principles between traditional banks and providers of alternative financial services - between the old and the new. There have arisen discussions about these forms of business in the public space, where one sector is as-sociated with the untested, unknown, difficult, but the other with adherence to principles and bureaucracy.

Financial sector is on the verge of a technological revolution

Right now, we see how people’s habits regarding payment execution change – we increasingly choose to leave coins and banknotes at home, we want to obtain credits within minutes not hours. Personal finances and their flow move to digital, online environment. The form of how people come into contact with money, how it is spent, received and transferred is changing rapidly. There are new services for consumption of goods, new trade platforms, in which completely new mechanisms are in place, not the ones used so far.

Modern financial technologies not only simplify our everyday lives but they also change the relief of traditional sector. In the dynamic pace of life of today people have less and less time for a face-to-face contact with their service providers, which requires considerable time resources, creates bureaucratic obstacles, and furthermore are relatively costly. Instead availability and mobility are becoming the priority.

Providers of alternative financial services create and offer more and more personalised products, on the form, usability and functionality of which the end users, their interests, needs and wishes have increasingly bigger impact. Each year, representatives of the sector and the supervisory authorities invest a lot of work to get control mechanisms in order, ensure the same principles to everyone, that is, to provide a modern and effective sector regulation.

Because of changing market trends and forms of money management, banks develop their products by making a step closer to the consumer and offering much more convenient and quick solutions. Banks become digitalised; artificial intelligence and automatization have increasing importance in their services. Also the financial technology or the FinTech sector starts to create a synergy with products that are familiar to consumers, which have been offered by traditional banks since many years, in order to keep its market position.

As one of the most current examples we can mention the interest of distance credit companies about introduction of credit cards in their business operations.

Opportunity for the innovative to become traditional and for the traditional to become innovative

The oldest active bank is 546 years old this year but the modern FinTech era can be considered to have existed only the last ten years. In the history of financial organisation banks were something new too, which was associated with the insecure and unknown, and the modern institutions of alternative finances are going through the same now.

Taking into account the increasing role of modern technologies in our everyday lives and the fact that FinTech companies offer their customers much less bureaucracy, their services are less time-consuming and have a democratised access to them, this industry has every chance to occupy more safe and stable positions in the nearest future, in order to become a traditional and long-term value. A significant factor which brings people and the providers of alternative financial services closer together is the fact that these institutions remove barriers between a person and the lack of possibilities to conveniently receive, spend, invest and manage their finances.

If we look at the technological capacities, at the moment Fintech companies are one step ahead of banks, but the traditional bank sector has a very significant advantage – experience, precisely developed and regulated operation principles and processes. If both sectors will be able to combine their strengths and create constructive competition, then the sector and end users will only benefit.

There is a false perception that FinTech sector threatens banking. On the contrary – in the current period of change it complements and diversifies financial systems of banks, it challenges banks to improve and develop their processes, it does not replace them nor it disrupts them. However, banks cannot rest on their laurels because with increasing consumer requirements and with increasing trust for the modern, demand for innovations, comfort, and mobility, which are the main advantages of FinTech, will rise even more significantly.

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