How Banks Are Competing with Fintechs: Affordable Currency Conversion, AI, and Beyond

Between deposits and loans, modern banks offer a plethora of financial services, and more often than not, they are outpaced by fintechs. The reason is simple: banks follow heavy regulations and are mostly bureaucratic, which makes them slow, and it is difficult for them to adapt to modern trends quickly. Fintechs are flexible and they can operate with much fewer employees, enabling them to deploy services and products sometimes in weeks.

Currency conversion – A battle almost lost

One major flaw of banks is their inability to offer competitive currency rates. Bank rates are often much higher than fintechs, and they are also slow, while startups usually provide lower rates, and users can convert and transfer money faster using modern apps. However, many banks started to use AI and other cutting-edge technologies to reduce the edge for fintechs. Banks like BankPro that operate globally, offer competitive rates, which makes it difficult for fintechs to fully win the battle in this category. The number of banks that offer better conversion rates is growing daily as they pour more resources into better and faster online infrastructure, and many banks have also started to provide better rates when logging in using mobile apps. 

The trust factor: Banks’ secret weapon

Fintechs position with slick apps which are difficult to ignore, but banks hold a distinctive ace: decades of built-up trust. Older generations and clients with money wealth still prefer the security and peace of mind of household names like HSBC and Bank of America. There is a strong argument why banks are seen as safer when compared to less-established fintech startups. They are heavily regulated and have to follow strong ethics, or their reputation will suffer, and they will get fined heavily. Banks use this strategic edge to advertise themselves as safe and reliable partners that care for clients by offering the best services. This often extends beyond just services, and banks try to offer exclusive benefits to their loyal customers. Fintechs, on the other hand, know how to use their edge of being more flexible and innovative, often operating with fewer regulatory hurdles than banks. Banks strengthen their safety by deploying “invisible security” systems like Goldman Sachs’ “continuous verification” systems, which scan transactions for fraud 24/7, significantly reducing breaches. 

Tech Makeover: How banks got faster

Long gone are the days of 3-day international transfers. Banks incorporated modern real-time systems like the FedNow (U.S.) and SEPA Instant (Europe), enabling them to process payments in seconds. HSBC’s SWIFT GPI integration cuts settlement times from days to under 30 minutes for most of the transactions. Improvements in cross-border payments are crucial for banks to compete against fintech startups that often provide faster and cheaper transactions. Here is how banks achieve all these improvements:

• Legacy systems – Banks replaced outdated tech with modern cloud-based platforms, increasing speed and slashing operational costs at the same time. 
• APIs for the win – Modern banks let e-commerce platforms embed currency conversion and other services directly into checkout flows. 

It became easier to connect a bank account to a shopping website and buy anything quickly using bank loans, an innovation that was possible because banks had to compete with fintechs. 

The AI edge: Beyond chatbots

Fintechs were first to embrace AI, but banks started to catch up lately, and now they lead with hyper-personalized tools that feel like financial co-pilots. Many banks employ AI and machine learning to approve small loans in mere seconds by scanning tax records and cash flows. This enables banks to quickly offer personalized limits and loans to small businesses and retail clients, which makes the process both comfortable and fast. A new trend of ESG bankers has emerged where banks use AI to track carbon footprints per transaction to suggest greener payment routes. However, the more profound way AI has transformed the banking sector is to monitor typing speed and screen pressure to spot thieves and detect fraud. These systems also made the whole process of using mobile banking apps easier and more convenient. 

Blockchain’s quiet revolution 

Banks were not among the first to adopt new blockchain technology. They stealthily adopted blockchain for zero-fee corporate transfers. Many banks are partnered with blockchain projects such as Circles USDC to enable 2-second conversions between dollars and euros for seamless translation speeds. Asset tokenization and layer 2 networks are also in the spotlight among banks to utilize this revolutionary technology to refine financial services. 

In the end, banks are adapting to new developments, and when they implement these new technologies in their services, they are usually refined and very well-regulated to ensure safe and compliant financial services.