In today’s modern technological climate, financial technology is becoming the preferred method of banking, particularly among millennials. Because fintech is a very new concept, it has been a slow process to incorporate its services into the already established ways of banking. Although many banks are hesitant to back financial technology companies, some have chosen to lead the way towards financial modernization. Instead of resisting the inevitable, they are jumping on-board. Fintech and traditional banking methods have a huge potential to offer one another things that the other is lacking. For instance, traditional banks have already developed strict business structures, which is important in providing stability. On the other hand, fintech companies are less stable, but are attractive for their flexibility and plans. Both infrastructures support the other where it is lacking and complement one another.
In connection to bank regulations, banks have strict regulations that discourage them from involving themselves with certain markets and individuals. People or companies are oftentimes rejected from working with banks, and it has become extremely difficult to open corporate or individual bank accounts. Fintech companies have picked up the slack when it comes to assisting these companies and individuals. Their business model has included strategy in order to assist small and medium-sized endeavors. Banks and fintech together can serve all levels of the population; allowing the big banks to model to assist their preferred customers but to give fintech companies the infrastructure to succeed in helping a different population of customers. Both sides benefit because business will reach a greater number of people, which equals profit.
Throughout the attempt to incorporate fintech and banks together, most analysts have focused mostly on how the banks can change to adjust to financial technology. And while many fintech companies have been getting a lot right, there are still some that can be doing better. The biggest example is fintech companies that are attempting to replace banks rather than work together with them. Unfortunately, in this moment, financial technology doesn’t have a strong enough base to succeed without the help of the banks. The world is only just warming up to the idea of financial technology. There is no basis or value to the industry. In today’s current atmosphere, fintech is particularly powerful in serving the under-served. Even in this very market that is their strongest, they still are not profiting more than banks.
Many traditional banks view fintech as a threat. With that, if banks continue to feel threatened, they will continue to push and support for rules and regulations that favor banks and disfavor financial technology. Fintech companies who are attempting success on their own pose a threat for other fintech companies who are complying. Financial technology on their own is fulfilling the prophecy that they are a threat to the banks. It is naive to think that financial technology companies have it all figured out. There is a huge market in the financial sector, and financial technology has a lot to learn. Luckily, the traditional banking methods are there to help fintech start-ups in this early stage of the industry. In the future, it is very possible that fintech will spread their wings and succeed without the backing of a bank, but unfortunately, that time is not now. It is more beneficial for all parties that the two find a way to work together during this transition instead of assuming we will succeed alone.