Everyone has been discussing the sudden boom of Fintech, from bankers to mass media to financial services professionals, and the challenges and benefits they bring to banks. Google trends confirm that many conversations are going on about Banks and Fintech. Most banks are struggling to be recognized in the world of Fintech companies. Struggling in every aspect of their business ranging from payment services to corporate lending.
In this article, you will learn the difference between Fintech and Banks, the benefits of the collaborations of the two companies, and the disadvantages of their collaboration.
Difference between Fintech and Banks
Fintech is the combination of two concepts: finance and technology. In short, these “new” companies specialize in providing financial services through mobile app development, software development companies and other technological devices. They use modern software and are generally dedicated to making lives easier and faster.
You may use some Fintech without being completely aware; even something as simple as paying for your internet or phone service from software used for custom software development has a bit of Fintech magic. You would be surprised by the number of companies specialized in finance and custom developer agencies that exist. Fintech is not a bank. They only provide banking services.
A bank is a financial institution that accepts deposits and allows users to withdraw deposits from the public.
Read: Web Data Extraction, the Whats, Hows, and Don’ts
Benefits of Fintech Collaborations with Banks
Many financial services companies are saying they are confident that Fintech would help in their company’s growth in the future. The benefits of Fintech collaborating with banks go beyond increasing revenue, though. These are some of the advantages of the collaboration between Banks and Fintech.
1. Broadened Consumer Base
When Banks and Fintech are in partnership, it is do it for me, and I will do it for you, plan. By the collaboration of the two companies, each IT company outsourcing can tap into the existing consumer base of the other. For example, Fintech can reach older customers due to its connection with a bank, while the bank finds that the partnership brings a younger demographic the way.
2. Offering more functions and features to consumers
Collaboration between banks and Fintech will allow the bank to offer its customers valuable features and functions that it wasn’t previously able to provide, such as money management tools or mobile check deposits.
Read: When Will Shiba Inu Coin Reach 1 Cent?
3. Building up brand reputation
By their collaboration, if one good has a good reputation and the people know it, the other can help the one that is not yet known to grow. For example, Fintech in banking is a highly regarded software company. Fintech companies launch an app with a bank, the bank can profit from the stature and status of the Fintech company. One of the benefits will also be if the two companies have the interest of their customers in their plan and budgets.
4.Reduced Costs
If the two companies collaborate, it will make it less expensive for banks to work with a Fintech company, and it will help improve the digital services they offer to their customers than doing it on their own.
5. Increased ease-of-use
This is the last but one of the most important benefits of the two companies’ collaboration. Online banking apps are works of custom software development firm and it is built in user-friendly, making them easy for customers to use. When a bank partners with Fintech, it will surely benefit from its technological know-how and user experience to provide consumers with an intuitive and easy-to-use program.
6. Small business loans
When Fintech partners with banks. It allows Fintech companies to benefit from lending from banks. Some companies focus specifically on developing loan programs for small businesses, which often find it challenging to get financing from banks.
Read: What is Gstatic? All you need to Know
Disadvantages of the Collaborations of Banks and Fintech
Consumers’ lack of exposure to tech can negatively impact banks and Fintech working together
Not all customers know how to use tech, especially some older adults. While talking about their benefits, we should understand that some people aren’t all that acquainted with the technology. This type of person will prefer to go to the bank for any minor issues to their bank account instead of discussing it through technology. The coming together of these companies will affect these people.
Collaboration between banks and Fintech can create trust issues.
The Collaborations between banks and Fintech is excellent, but many problems are underlying it, and the solution isn’t generally accepted. Banks have gained the trust of their customers for many years they’ve been operating and won’t allow Fintech to take their place. It will create trust issues because Fintech may not trust Banks, and many do not trust Fintech. This collaboration may lead to arguments and spoil the reputation of both companies.
Banks will face an increased dependency on tech.
Despite being in the technology era, there are still people who process their money through an automated and manual process. And the manual process still has more power than automated. Fortyseven software professionals also provide great software when it comes to automating payment and receiving it.
It’s not impossible to implement changes, but it does require a ton of effort. This means the collaborations of the two companies may result in a complete transformation of how traditional banks work while increasing tech dependency for the banks.
Banks and Fintech working together may bring about new risks
Banks adhere to financial rules, unlike Fintech, which doesn’t follow all financial rules because it is a technology made easy. A Fintech startup intervening with the banks’ legacy systems can cause new, unforeseen risks like strategic, compliance, operational, and cyber risks.
Conclusion
Banks have seen that Fintechs know how to interact, meet customers’ needs, and serve them better. Most financial institutions cannot be as creative as Fintechs because they are backed up by software development companies and mobile app developers. Generally, banks use strategies like launching their own Fintech companies, creating startup programs to incubate Fintech, setting up venture funds to sponsor Fintech, establishing partnerships with Fintechs to address Fintechs’ boom.
Hanna Shnaider is good at what she does. She can help with your needs on how to navigate Fintech and Banks collaborations for your companies and businesses. Using Fintech and banks to manage your financial services will reduce the time spent and allow your business to stay ahead of your competitors.
You might also like
What is AzureWave Technologies and How Does It Work?
