Is FinTech a challenge to existence of Traditional Banks (2024)

FinTech (financial technology) has transformed the financial industry in recent years, offering novel and convenient digital banking solutions with the ability to challenge traditional banks. Traditional banks continue to have numerous advantages over FinTech firms, including an existing client base, the ability to comply with regulations, and access to capital.

Traditional banks have a long tradition of providing financial services, which customers may find comforting, whereas FinTech firms provide innovative digital solutions. Customers who prefer to deal with their bank in person or who require a cash deposit or withdrawal can greatly benefit from conventional banks' physical branch locations and automated teller machines. Because they lack the experience and resources that traditional banks have, new FinTech companies frequently struggle to break through. Finally, while many FinTech companies are still accumulating financial resources, traditional banks have substantial capital reserves that can be used to weather economic downturns or unexpected challenges. Although FinTech firms compete fiercely with traditional banks in some areas, it is extremely unlikely that they will be able to completely replace traditional banks anytime soon. Instead, the best financial services for customers will almost certainly come from conventional banks competing and collaborating in various areas.

Traditional banks should give special attention to four key areas when rethinking their business strategy:

• Collaborating with FinTech’s.
• Modernize key capabilities.
• Creating products and services that are centered on the customer.
• Establishing agile teams.

All four of these factors should work in tandem to provide customers with higher-quality service, greater brand recognition, and lower prices for their goods and services. Traditional banks must reconsider their design and delivery capabilities to develop a strong strategy that develops technical capabilities and supports a seamless omnichannel journey and superior customer experience. Banking as a Service necessitates the development of a highly configurable central processing platform and a hybrid cloud-based architecture. (BaaS). Banks can add more value to their clients by collaborating with Fintech firms. Collaboration between banks and FinTech’s is critical for increasing market share, introducing innovative products and services more quickly, lowering operational expenses, and scaling operations. To accomplish this goal, banks must implement radical change and form smaller cross-functional teams comprised of both decision-makers and "doers." Furthermore, banks can profit from remote work and a decentralized workforce by lowering infrastructure costs, streamlining business processes, and transitioning to AI-led banking.

Traditional banks must adapt to the changing financial environment and capitalize on the opportunities offered by technological advancements in order to thrive in the age of Fintech. Typical financial organizations can use the following techniques:

• Examples of how traditional banks can benefit from digital transformation include online and mobile banking services. This will enable them to cater to the needs of digitally savvy customers.
• By collaborating with FinTech’s and traditional banks, customers can receive cutting-edge banking services. Working with Fintech firms enables traditional institutions to gain access to their expertise and experience.
• Investing in R&D can assist traditional banks in developing novel and useful banking services. Companies that prioritize research and development are better able to adjust to the needs of their customers and remain competitive.
• Traditional banks can differentiate themselves from the competition by emphasizing the quality of service they provide to their customers. Traditional banks can keep and attract new customers by providing customized services and a streamlined digital experience.
• Traditional banks' reputations and trust can be strengthened by emphasizing their strengths, such as safety and security and strict adherence to regulations. Traditional banks that maintain a sterling reputation can attract and retain clients who place a high value on confidence and predictability.

To summarize, traditional banks can thrive in the Fintech age by embracing digital transformation, forming partnerships with Fintech companies, investing in innovation, emphasizing the customer experience, and building a solid reputation.

Conclusion

As a result, many FinTech firms have formed alliances with more conventional banks to improve the quality of services provided to clients. This shows that traditional banks and FinTech firms can collaborate and even coexist. As a result, while FinTech presents some challenges for established financial institutions, it does not represent an existential threat. Traditional banks can remain relevant in the financial industry by embracing new technologies, forming strategic alliances with FinTech firms, and concentrating on improving the quality of the services they already provide to clients.