The financial sector has always been resistant to technological change, a symbol of unwavering consistency, even in times of turbulence. However, banks cannot afford to ignore the digitalisation of financial services, which can speed up financial processes, cut costs and send the traditional banking landscape into disarray.
Nearly 20 years ago, PayPal launched account services and peer-to-peer payments, during a time when people thought money transfers couldn’t go beyond their bank accounts and in the last decade an explosion of disruptive fintech offerings have further challenged the traditional banking system. Discerning tech companies are honing-in and focusing on customer experience and, combined with the widespread inertia felt towards the financial industry, users won’t hesitate to switch to services that are better tailored to their needs. Banks must implement new business models of engagement to keep pace with competitors or risk becoming obsolete.
Last year, additional high-tech developments, regulatory policies and increased customer expectations continued to reshape the banking industry, with clients in 2018 demanding a more connected, customer-centric borrowing, saving and spending experience. Firstly, the growth of mobile internet has led to universal connectivity, allowing approximately 3 billion people internet access, and secondly, the rise and domination of social networks continue to revolutionise the landscape, placing customers at the core of business. The smartphone revolution ensured customers no longer had to put up with long queues and wait times to deposit money, trade or request a chequebook. And as the number of mobile phones continues to rise, changing the structure of finance and banking, the challenge for both fintechs and banks is to combine internet technology with banking services. While banks remain ahead of the game by the sheer size of their customer base, most financial institutions simply can’t build the technology as swiftly and resourcefully that a start-up, with its high-end developer talent, agile methods and speedy implementation, can. Focused on user experience and prioritising convenience, their ideas appeal to the younger digital generation and are turning banks’ traditional top-down approach to managing customer relationships on its head.
Fintech investment deployed $16.6bn across 1,128 deals to VC-backed fintech companies in 2017, Europe alone saw funding grow 121% year-over-year, and, with an unprecedented amount of funding in fintech, 2018 is set to be a game-changer for retail banking. This growth is driven by the increasing dissatisfaction with traditional banking models, demands for answerability and the ever-increasing tech-savvy customer base. The number of digitally active consumers has risen from just one in seven in 2015 to one in three in 2017, according to the EY FinTech Adoption Index 2017, highlighting the impetus for banks to modernise their processes and streamline their practice.
With this increased focus on speed and convenience, banks are looking to the fintech start-ups who are disrupting the marketplace by offering technology and services that challenge their traditional brick and mortar. By identifying what banks offer – or more importantly, what they do not offer – these new contenders focus on the customer, and more importantly, on solutions. Additionally, payment options that were once limited to cash or card, are now open to contactless, smart tap, mobile payments or even ‘pay later’ options. Not forgetting that cryptocurrencies like bitcoin and ethereum, and contactless payment platforms such as Apple Pay technologies, once considered disruptive or unsustainable, are now all entering the mainstream.
With the advent of PSD2 and open banking initiatives helping to ensure maximum transparency and security, the regulatory barriers that once kept non-bank competitors at bay, are collapsing. These new guidelines to boost financial inclusion and promote a cashless society have paved the way for 4,200 fintech start-ups in Europe alone. Banks are feeling the hot breath of competition from PayPal, Google Wallet and others whose mobile payment technology threatens to displace them in everyday consumer transactions. Originally seen as a hazard to the stability of traditional financial services, banks have recently come out as one of the main supports for the fintech community as the diversity of new services and apps essentially merge with banks’ strategic goals. The days when banks viewed fintech companies as disruptors are numbered, and they are increasingly looked upon as allies, to team up with to take on the challenges of the new digital world. Traditional financial institutions are recognising that networking with new industry contenders could prove invaluable, and fintechs, in turn, understand that banks provide priceless capital, scale, data and regulatory support. Banks and fintech start-ups can – and do – collaborate, with the former providing stability as the latter drives innovation.
Numerous enterprises are offering the latest, innovative technology and services for sending and receiving money. It is like banking in an apps store. There are various players that are writing fintech history and defining the future in fields like cryptocurrency, blockchain, bitcoin, mobile wallets, challenger banks, user experience, lending and big data, with none more inspired than Mash, offering customers a personalised and efficient service, with a reliable and flexible payment method. Launched in 2007, Mash (https://www.mash.com/) leverages its exclusive processes, machine learning capabilities and automated platform to deliver finance and payment solutions to thousands of customers every day, demonstrating the growing competition in the landscape. While paying merchants immediately, it offers the chance for customers to pay later, allowing for greater flexibility and increased spending capabilities over traditional payment methods. Mash is one of only two companies in Europe that provide both an in-store and online payment solution, with this latest development part of a rapid scaling up across Europe.
As the profitable financial sector continues to appeal to new investors and market players, the subsequent competitive environment will continue to encourage innovation and drive growth. Various payment start-ups, apps and challenger banks that launched within the last decade already service millions of clients. The ever-changing regulations and speedy digitisation dictate that financial organisations and fintechs need to collaborate, not compete if they are to grow, innovate and continue to stay current. Most importantly, fintechs like Mash help the financial services industry to reconnect and stay connected with their customers, and by fulfilling customer demands, banks will see increased consumer acquisition and improved customer retention. Bankers have the experience, financial records and cash. Fintechs have the progressive nature, technology and courage. Who would you trust with your money?
Banking and fintech – a combined effort and joint approach can create a solid financial system that works for all. Their partnership helps combine a large customer base with confidence, regulation and innovation-the holy trinity of prosperous banking.