{"id":38194,"date":"2020-09-03T16:26:36","date_gmt":"2020-09-03T13:26:36","guid":{"rendered":"https:\/\/www.bondora.com\/blog\/?p=38194"},"modified":"2020-09-03T16:26:36","modified_gmt":"2020-09-03T13:26:36","slug":"breaking-the-bank-are-fintechs-taking-over","status":"publish","type":"post","link":"https:\/\/goandgrow.eu\/en\/blog\/breaking-the-bank-are-fintechs-taking-over\/","title":{"rendered":"Breaking the bank \u2013 Are fintechs taking over?"},"content":{"rendered":"\n

We live in the age of digitization. Everything has gone digital, including banks. Gone are the days of having to withdraw cash for payments, or visiting your local branch to pay your accounts. You can simply swipe a card, use your mobile app to transfer money, or scan a barcode to make a payment. But is it enough? Banks aren\u2019t the only players in the money game anymore. Fintechs have been rising to the occasion and filling the gaps that banks have left for consumers: unsatisfying online experiences, lack of digitization, and poor interest rates<\/a>. Although banks have migrated to a more digital way of operating, they are no match for fintech companies that live and breathe tech and transformation.<\/p>\n\n\n\n

\"Are
Are banks doing enough to keep their fintech competition at bay<\/em><\/figcaption><\/figure><\/div>\n\n\n\n

The rise of fintech banking<\/h2>\n\n\n\n

The digital banking market has been gaining popularity over the last couple of years, and recently, its growth has skyrocketed exponentially. Younger generations have been turning to digital solutions<\/a> for ease and comfortability since their teen years, but now that they\u2019ve entered the job market, their taste for tech created a gap that only digital banking can fill.<\/p>\n\n\n\n

Digital banking offerings from competing fintechs have been especially welcomed by individuals who don\u2019t fit the \u2018one-size-fits-all\u2019 parameters of traditional banks:<\/p>\n\n\n\n

\u201cAcross the globe, virtual banks without a physical presence are launching annually, chipping away market share from incumbent banks. Offering the latest in innovation and access, these entities are meeting the needs of underserved segments such as unbanked<\/a> and underbanked, immigrants, freelancers and independent contractors, and small businesses, \u201d writes the editor of Fintechtris<\/a>.<\/p>\n\n\n\n

This inclusive, client-focused and tech-powered approach to serve consumers who are looking for banking alternatives has given fintech companies the foothold it needs to take on traditional banks.<\/p>\n\n\n\n

\"Digital
Young people and individuals who don\u2019t meet banks\u2019 requirements gain the most from digital banking.<\/em><\/figcaption><\/figure><\/div>\n\n\n\n

Fintechs offer better user experiences<\/h2>\n\n\n\n

A recent study<\/a> by Bank Director in the US, showed that 59% of consumers are open to the idea of banking with a major tech company. Considering that people are very cautious when it comes to investing and saving their money, having more than half of respondents say \u2018yes\u2019 to brand new tech banking options, is quite astonishing.<\/p>\n\n\n\n

One of the possible reasons for this acceptance would be the easy integration<\/a> that tech companies offer. Think of how Apple partnered with Goldman Sachs bank to create Apple Card\u2014the trillion dollar company\u2019s version of a credit card. Apple took the sleek design it\u2019s known for, and applied the financial abilities to its iPhones. They utilized technology they already had in their phones and added Goldman Sachs\u2019 reputability as a financial institution \u2013 with almost zero effort required from the consumer:<\/p>\n\n\n\n

\u201cUsers sign into their wallet app on their iPhone, click Apply, fill in their info (much of which is auto-populated), and click Accept. It\u2019s so convenient and simple that users are going to have a hard time accepting prior [payment] methods,\u201d the study described.<\/p>\n\n\n\n

Compare that level of ease with the lack of technological innovation and lower savings rates<\/a> offered by banks, and people are more than likely to invest and save their money with tech giants instead of banks.<\/p>\n\n\n\n

\"Apple
Apple has entered the financial market and show no sign of backing down.<\/em><\/figcaption><\/figure><\/div>\n\n\n\n

Apple hasn\u2019t been the only tech-based company with success. UK neobank darling Revolut has also seen a sharp rise in revenue, tripling from \u20ac63 million in 2018 to \u20ac177 million in 2019. At the end of 2019 they also had over 8 million users and it\u2019s continuing to increase. These numbers indicate that banks are losing out and people are definitely optimistic about nonbank fintechs.<\/p>\n\n\n\n

But it\u2019s not all smooth sailing for the so-called challenger banks<\/h2>\n\n\n\n

Although no one questioned the validity of neobanks and their ability to change the world of banking, this year has been tough on many fintechs, especially those who haven\u2019t yet turned a profit. In the UK, rising stars Revolut and Monzo both took a hit in the financial crisis. The \u2018new normal\u2019, which resulted in a lack of spending and smaller deposits, meant less revenue for them. This, along with the fact that they are operating in the red, doesn\u2019t help their situation.<\/p>\n\n\n\n

Forbes<\/a> argues that people aren\u2019t yet ready to leave their traditional banks behind and as a result, people\u2019s relationship with neobanks aren\u2019t getting stronger: \u201cWith normality slowly returning, the coronavirus pandemic deepened our relationship with the businesses and technology which we came to rely on most. But lockdown shows the consumer relationship with neobanks is simply not deepening.<\/p>\n\n\n\n

Consumers\u2019 reluctance to commit to neobanks, along with the current financial crisis will make life harder for neobanks than it has ever been.<\/p>\n\n\n\n

Banks have been around long enough to know how to fight back<\/h2>\n\n\n\n

Banks aren\u2019t going to make it easy for fintechs to take over. They\u2019re aware of the competition and won\u2019t give up without a fight. Slashing fees<\/a>, offering more tech-based services and improving on existing digital experiences<\/a> are only some of the strategies banks have put in place to keep their consumers happy. Some banking companies have even acquired stakes<\/a> or invested in fintechs to also cash in on their next-generation technology.<\/p>\n\n\n\n

And quite simply put, they have deeper pockets and much more experience in the financial world, giving them the clear advantage. \u201cThere is a history and trust that exists between banks and their customers that fintech is still years away from rivaling,\u201d reports American Banker<\/a>.<\/p>\n\n\n\n

\"Banks
Banks have withstood chaos financial crisis and critics for as long as they have existed<\/em><\/figcaption><\/figure><\/div>\n\n\n\n

Surprisingly, it turns out that public perception of banks is more positive than one would think. When asked how banks are performing in the digitization process, in the same Bank Director study<\/a>, only 11% of respondents thought that banks are behind. This confidence in banks\u2019 ability to digitize indicates that consumers aren\u2019t going to close their bank accounts any time soon, even if they are open to investing with fintechs.<\/p>\n\n\n\n

Who will get more bang for their buck?<\/h2>\n\n\n\n

At the moment, it\u2019s still too early to say who will come out on top in this money game. Will banks and fintechs co-exist to offer the best of both worlds? Or are banks embracing technology enough to withstand the fierce competition from fintech companies? Maybe fintechs will prove to be the next generation of banking solutions and leave traditional banks in the dust. There\u2019s no way to tell what the future holds, but we\u2019re excited to find out<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

We live in the age of digitization. Everything has gone digital, including banks. Gone are the days of having to withdraw cash for payments, or visiting your local branch to pay your accounts. You can simply swipe a card, use your mobile app to transfer money, or scan a barcode to make a payment. But […]<\/p>\n","protected":false},"author":11,"featured_media":38195,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[119],"tags":[],"class_list":["post-38194","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-financial-well-being"],"acf":[],"featured_image":null,"categories_names":["Financial Well-being"],"category_name":"Financial Well-being","_links":{"self":[{"href":"https:\/\/goandgrow.eu\/en\/wp-json\/wp\/v2\/posts\/38194","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/goandgrow.eu\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/goandgrow.eu\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/goandgrow.eu\/en\/wp-json\/wp\/v2\/users\/11"}],"replies":[{"embeddable":true,"href":"https:\/\/goandgrow.eu\/en\/wp-json\/wp\/v2\/comments?post=38194"}],"version-history":[{"count":0,"href":"https:\/\/goandgrow.eu\/en\/wp-json\/wp\/v2\/posts\/38194\/revisions"}],"wp:attachment":[{"href":"https:\/\/goandgrow.eu\/en\/wp-json\/wp\/v2\/media?parent=38194"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/goandgrow.eu\/en\/wp-json\/wp\/v2\/categories?post=38194"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/goandgrow.eu\/en\/wp-json\/wp\/v2\/tags?post=38194"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}