Banks are no longer the only providers of financial services to customers. According to CapGemin report, almost 66% of the customers are using products or services provided by Fintech companies. Penetration of Fintech companies is higher in emerging markets along with consumers having better relationship with Fintech firms.
The report also found that customers who are already using Fintech are much more likely to refer family and friends to their Fintech provider (55%) compared to their bank (38%). Most of retail banking customers polled for the study said Fintech provides a better user experience than the banks.
However, although almost all banking executives agree that the financial industry is moving towards a digital ecosystem, an area where Fintech providers play a bigger role, only few have the system to support it.
Customers are finding that Fintech companies provide easier transaction processes. Firms like PayPal are providing technology-based services (loans and payments) that dramatically lower overall difficulty and friction in the transaction processes, the kind of services highly needed by consumers. Consumers want better person-to-person payments, mobile deposit capabilities, and bill payment experience. Currently, Fintech is companies have a competitive edge in those areas.
How are the Banks responding to Fintech competition?
Though financial technology firms have turned their sights on the banking industry, banks aren’t going to give up their position without a fight. The question that we need to ask ourselves is: How are banks defending themselves against Fintech firms?
Many banks are developing partnership with Fintech companies. For example, technology vendors such as Google and Apple are emerging allies for banks to widen their digital services for today’s customers through services like Google Pay and Apple Pay.
In the UK, RBS and Santander have partnered with Funding Circle. Consequently, if a customer’s credits history isn’t good to get a loan from the banks, then he/she can talk to Funding Circle. There is also a rumor that Société Générale and Goldman Sachs are supporting Aztec Money, a developing peer-to-peer financing platform. We expect more and more of this relationship to develop every day.
Banks are also responding to Fintech challenge by offering new options and cutting fees. For example, in the beginning of this year the Bank of Montreal started a SmartFolio investment service, which provides a professionally managed portfolio online. This service is offered at a low fee.
To remain competitive, banks are cutting fees and making it easier for customers to have accounts and manage money online. Online banks such as EQ Bank and Zag Bank, which are supported by Equitable Bank and Desjardins Group respectively have been launched. These online banks have promised to lower their fees and introduce apps to help customers manage their money.
Now the big question is which party will hold the primary relationship with consumers: Banks or Fintech firms. The answers are contentious and only time will tell.
We will love to hear from you, please leave your comments in the comment box bellow, don’t forget to share this article if you fined it helpful. Remember to subscribe in the subscription box bellow so you can get our latest updates in your email. Join us on Facebook and Twitter.