Banks Push Back

by | May 15, 2019 | Blog

For many years, start-ups have been filling in the blanks for eCommerce merchants. The push for FicTech to serve the needs of the industry have been customer driven, and somewhat ignored by conventional banking institutions, however, banks and financial institutions are starting to evolve and reclaim the market.

A recent announcement from Spain’s Banco Santander SA that they would invest €20 billion over four years into digital transformation is testament to the realisation that banks are catching up.

Skeptics of the FinTech sector claim that customers will return to banks when they invest in FinTech owned by the banking industries major players. This is because there is a public perception that banks are more ‘trustworthy’ than start ups.

Neo-lenders offer far greater ‘perks’ than traditional banks, but they are still not able to compete in terms of customer numbers. Santander claims to have a 32 million online and customer base, while Revolut, a well-known neo-lender, has only 4 million. These smaller FinTech’s have started from a lower base than traditional banks, and do not have the same data resources to draw from and attract customers.

FinTech’s are remaining unfazed by the investment of traditional institutions though. Start up FinTechs are leading innovation and meeting demand, while the traditional sector is merely copying and catching up. As more people are becoming tech savvy and seeing the benefits of neo-lenders, these smaller players are likely to maintain a strong presence, precisely because they are not attempting to replace banks, but rather offer an alternative. Keeping operations to a small scale means less costs, which larger institutions cannot compete with financially.

For FinTech operations to remain relevant, it seems they will need to offer something that banks can’t, and vica-versa. As people are moving toward an increasingly globalised lifestyle, having fast access to funds at low exchange and transfer rates is important for customers. This is a service that neo-lenders provide, but if banks do catch up, these FinTechs will need a better deal to ensure they remain relevant in the marketplace.

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