Fintech vs Legacy Banking; A Competition or Collaboration?
For the past 40 years, the world has witnessed numerous technological advancements; such as bank’s Automated Teller Machine (ATM), Point of Sale terminals, and mobile banking, which have enhanced consumer experience while increasing convenience, reducing costs, and streamlining processes.
Then came the recent challenges to global economy, innovations in mobile banking, p2p payments, and crowdfunding applications; which are pushing for disruption in financial services.
It is natural for traditional financial institutions to fear this disruption. It is estimated that nearly 80% of top executives believe that their firms are at risk of displacement from FinTech startups.
What does the future hold for FinTechs? There are several successful FinTech startups which are challenging the status quo. In Africa, for example, they leapfrogged all the way to Bockchain based mobile micropayments to overcome the lack of adequate traditional banking services. Unbanked segments of societies living in rural areas usually have limited access to traditional financial institutions. This unbanked segment is estimated at 2 billion humans. They either live in remote areas where banks don’t find it feasible to open branches or install ATMs, or they do not have the required identification documents to open a bank account. Therefore they are financially excluded. However, FinTechs like m-Pesa have changed this socioeconomic issue.
In Jordan, at Zaatari Refugee Camp Syrians are paying for grocery by getting their it is scanned via Blockchain-based mobile payment app, EyePay. No bank account, nor IDs are required. Simple and most convenient.
In Saudi Arabia, several innovative FinTech startups like Halalah have released products to convenience society. Halalah, for example, requires no bank account or complicated onboarding; rather a user would download the Halalah app from either the Android or iOS appstore, then with ease create a digital wallet and start transacting (send or receive money as little as a fraction of a dollar). Then the regulator, the Saudi Arabian Monetary Agency, released MadaPay follow by Saudi Telecom releasing STCPay, all in an effort to improve convenience, increase financial inclusion, reduce cash circulation, and reduce wrong doings like money laundry.
In Belgium, a young electronics professor created Sugi NFC Wallet Card, a bank on a card. The Founder, claims that Sugi will soon allow users to make in-store payments and ATM withdrawals worldwide in any currency: fiat, cryptocurrency, and tokens.
Nowadays, one could do her shopping or order sushi and get them delivered to her doorsteps without leaving her room. Today, customers want this same level of personalization and speed when it comes to banking. Who wants to drive to a bank branch, wait for an hour to get served if lucky, or wait for weeks for a loan application which might not get approved after all that waiting.
No doubt, FinTechs are reshaping banking, payment, and the perspective of money. However, we realize there are barriers and roadblocks to widespread business adoption of FinTech. Therefore, partnering with an established financial institution provides a way to access new markets and gain industry knowledge. No doubt, these partnerships are fruitful for all and puts the customer at the heart of banking.
