Fintech Is Shaping The Banking World


Submitted by Emma Cox as part of our contributors program

Fintech is shaping the banking world

While the big bank industry still sees the emerging fintech market as a competitor, there is no doubt that the nascent market comprising mostly of young, enthusiastic entrepreneurs is introducing changes in the industry.

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Some entities in the segment call the emergence of the new, innovative financing firms as an “attack” to the banks, albeit a positive one, as this forces them to evolve, change customer-shooing policies, and rely heavily on Big Data like every industry is doing in this age of digitalization.

“The financial services playing field has been changed irreversibly in recent years by a new generation of companies and leaders who have torn the rulebook to pieces, adopting new technology, introducing new working practices, and serving customers whose lives are increasingly orientated around their mobile phones,” said a recent research from digital innovation agency Adaptive Lab.

Without these fintech disruptors, a lot of banks across the globe may not have adopted app utilization. Among the leading “insurgents” of the sector are fintech firms Lending Club, Funding Circle, Nutmeg, Transferwise, and Venmo, all attacking not only the marketing aspect of legacy banking but also its core function such as payments, lending, investing, assessing, scrutiny, money transfer, and advising. These companies have offered never-before-seen-and-tested banking services—from peer-to-peer lending to crowdfunding—established lenders never had.

The segment that has enjoyed a total global investment amounting to $13.7 billion in 2014 is continuously growing. Now, even other industries realized how big the market is. Among them is Silver Falcon Plc (SILF:LN), a newly formed shell investment firm that aims to focus on acquiring promising fintech startups.

“[We] have significant track records in sourcing and executing successful acquisitions and returning value to shareholders. Hence, we know if the market’s promise is real or not. For the fintech, numbers don’t lie, and we’ve seen how startups from younger leaders cope with the changes in the sector, making this niche a big one,” Dart said after a laudable opening trade on London Stock Exchange on November 9.

But the fintech firms must also realize that these giant lenders could be their biggest competitor, too, especially now that these established banks are now starting to understand what they can learn from the smaller, more enthusiastic fintech firms. And it is happening. Now, big banks are merging and acquiring successful fintechs to get a grasp of what they’re getting from the market since 2013.

Just recently, British multinational bank HSBC (LON:HSBA) launched its very own fintech lab in Singapore to let banks work with various entities in the finance segment to develop innovative digital and mobile banking services. US BanCorp (NYSE:USB) announced in the first quarter of this year that it was working with Samsung Electronics Co. to build its very own mobile wallet in answer to the digital trend that American fintechs have started. It said that it will let its cardmembers to use the new Samsung Galaxy S6 phone for credit-card transactions as the bank develops more “secure, convenient, and innovative payment options.”

“Traditional banks have realized that a bank-fintech startup connection has immense potential for creating value for both sides. Banks gain innovation and technological flexibility, and startups are given the chance of leveraging the banks’ knowhow and infrastructures to create suitable markets,” said Dr. Ron Weksler of Globes.

 

“This realization has resulted in the drawing up of several strategies, some of which the world’s top banks are already implementing. ‘If you can’t beat them, join them’ is as valid an adage in fintech as anywhere else,” he added.

In that regard, the sudden birth of the fintech market will not only benefit the customers, but also the entire lending and financing segment. The Economist said that what the fintechs need to do is cut costs and improve the quality of financial services, which they can freely do now as “they are unburdened by regulators, legacy IT systems, and branch networks.”

What the nascent fintech market has really done is to wake the already-comfortable big banks from the long slumber and tell them that there are still a lot more to be improved in this giant industry—and, among which, and perhaps the most important of them, is taking it back to what it used to and should be: customer-centric.