More and more people – from casual account holders to serious entrepreneurs – are changing their attitude towards the traditional banking system and moving into the world of advanced financial technologies in the virtual space.
Every year, traditional banking is losing ground, giving way to new financial technologies. Now not just independent agencies, but also the banks themselves are talking about it. For example, according to global management consulting firm McKinsey, by 2025 between 10 and 40 percent of bank profits may be under threat due to the expansion of fintech companies. But the banks themselves, feeling the unfavourable trend, are trying to change – in the United States, Russia and the countries of Europe, not to mention large sections of Southeast Asia. And often banks, in order to proactively move ahead, find ways of cooperating with the most promising fintech companies.
Banks are trying to outrun time, but …
At the moment, even in ordinary banks, the system of interaction with customers is changing, since most of the work is carried out remotely via the internet. The traditional bank with brick and mortar branch offices, queues and paperwork is becoming a thing of the past.
One by one, the largest banks in Europe and Russia are closing branches that previously served corporate clients, large international entrepreneurs and casual checking account holders (especially the younger cohort, those born at the dawn of the new millennium). This all makes quite a bit of sense, as most people now use online banking, mobile applications, and call financial institutions’ customer service phone lines less and less, preferring to communicate online.
Yes, the global banking market is developing rapidly, though most international analysts believe that it still isn’t happening fast enough. One of the main reasons for the delay is that even internet banks that respond more quickly to customer needs are still tied to the above-mentioned “on the ground”, brick and mortar system.
And this is not so much about immovable property, but rather about pegging to the entire system of countries where operations are being carried out – from an overly strict legal framework to multifaceted monitoring services.
Clients go to fintech for efficient service
Another reason that fewer and fewer clients entrust their money to banks is the fear that they may cease to exist during the next financial crisis, and these clients are looking in the direction of payment companies. One of the biggest advantages of fintech companies is that they efficiently deal with clients’ needs abd respect their time, because they understand how valuable it is.
One of the main mottos of fintech companies is “down with queues”, because everything can be done online, without getting up from your desk at home or in the office. The structure of fintech companies is simplified in order to always be “get-up-and-go” when working with clients. Thanks to advanced technologies in the virtual financial world, automated processes allow customers to solve problems much faster than traditional banks are capable of doing. For example, waiting time for opening an account isn’t two weeks or a month, as with most traditional banks, but can be done in a day or two.
It is worth noting another important point. Although banks are actively developing in the virtual space, trying to encourage customers to use their websites and mobile applications, many of their customers are savvy enough to see clearly the shortcomings of the traditional banking system – and they are leaving for fintech companies.
At the conference “The Future of Fintech. Open banking. Payments. Cryptocurrency”, held in Tallinn in 2018, it was stated that in two years up to 90% of e-commerce business, as well as 60% of ordinary small and medium-sized businesses in Europe will already be served by payment companies: entrepreneurs will switch to them from banks. European traditional banks are rapidly losing their share of the financial market.
The virtual world is becoming more technological than the real one
Another major advantage of fintech companies is that, in competing with the traditional banking system, they have developed not just rapidly, but at an unprecedented pace. The fintech industry is made up of companies using state of the art technologies, innovations, and numerous start-ups – to improve and optimize financial services.
Fintech technologies are constantly modernizing traditional financial services; for example, online payment and transfer systems between individuals and legal entities; the system of virtual cryptocurrency exchanges, which are now more and more successfully competing with fiat ones, is confidently developing.
Add to all of this the system of artificial intelligence and machine learning, about which we have previously written in our blog. Large platforms, such as Vanguard or Wealthfront, have developed their own program-bots for “smart investing.” Summarizing all of the above, it is clear how far ahead of traditional banks fintech companies already are. And by the time you have read this article to the end, something new, and probably more than just one thing, will have appeared in the world of fintech.