Are fintechs destroying or benefiting banking institutions?
Posted: Mon Dec 23, 2024 10:45 am
Fintechs are transforming the way we handle financial processes. The term comes from Financial Technology and defines companies that take advantage of technology, innovation and the enormous reach of the internet to offer financial services, just like traditional banks, but at much lower costs.
With the growth of fintechs, banking institutions are facing unprecedented competition. Every day, they are forced to implement innovative technologies to meet the needs of users who are eager for new, more demanding and informed services, and also to avoid being swallowed up by fintechs. Proof of this is a study by the Brazilian Federation of Banks (Febraban), which showed that, among the 10 largest global economies, Brazil ranks seventh in IT spending in the banking sector.
Content
But do fintechs destroy or benefit banking institutions?
What do new users want?
But do fintechs destroy or benefit banking institutions?
Although banking institutions have felt threatened by the growth of fintechs, which have taken over the space that was exclusive to traditional banks, the paradigm shift has brought positive consequences. Restricted to offering standard operations, banks were not very innovative until the emergence of fintechs. Therefore, they contribute by encouraging banks to work with more technological tools.
In addition to exploring the possibilities of using new technologies, banks have also started to invest more in security to protect their customers' information. In the search for security and agility in the development of these solutions, many banking institutions, instead of facing competition with fintechs, have preferred to partner with them or invest in partnerships and acquisitions of startups , transforming them into acceleration and innovation tools for their businesses.
This entire scenario represents many opportunities for fintechs, whether it is the creation of technologies for communication with customers or for financial services themselves. There are many fields to be explored and, therefore, partnerships have been a way to create solutions and services together.
Software development, user experience and financial know-how are some cpa mailing lists of the areas in which fintechs operate, offering complementary technologies. The result is advantages for banks, which benefit from having cutting-edge, specialized solutions with high connectivity potential with their legacy and new applications.
What do new users want?
New user behavior is undoubtedly the factor that most drives banking institutions to offer modern technologies. But what do these new users want? In short, a surprising experience that does not generate frustration.
As an example, we have the issue of a credit card. There are numerous companies that offer cards, but the customer experience is what sets them apart. Behind a simple use by the consumer to pay a bill, there is a large technological structure capable of verifying information and authorizing the transaction . However, this structure is not always well used, which creates a problem for the customer.
Consumers don’t want to know about the technology that makes it possible to use their cards. They just want a service that works and doesn’t cause frustration when paying a bill, for example. They don’t want to have to wait for a personal loan when they need the money, or have their transaction denied when they’re making a purchase that should work. They want to be able to access their banking information from any device, at any time, from anywhere.
Providing this good customer experience is the current challenge in the financial world and the reason for the great success of fintechs, which simplify the lives of those who need financial products, in addition to granting credit to those who did not have it. One example is a startup that operates in Nairobi, Kenya. According to the founder, Shivani Siroya , there are 2.5 billion people in the world without a credit history, rejected by traditional banks. Her company uses the consumer's cell phone to create their credit profile based on their contact list, their relationship with family members and other subjective information, with which it achieved the same compliance rate as a regular bank, using an intelligent process to create an assertive profile of those who need money.
People no longer have the same loyalty they had 30 or 40 years ago when opening a bank account. Users, known as millennials or Generation Y, want ease, agility and personalized services that meet their specific needs. If the service does not meet expectations or the competition offers something better, they switch immediately.
Faced with this reality, banks with legacy systems and complex technologies are struggling to increasingly increase their profitability, which involves, among other things, attracting more good customers, avoiding fraud and reducing the collection portfolio. All of this in a fast and efficient manner. In short, the modern institution must be a facilitator between what the customer wants and the language they understand. Those who fail to offer this lose money.
To achieve this positive experience and keep their customers satisfied, banks and financial institutions must integrate their technology and create credit intelligence, with cutting-edge analytical models and business rules that can be changed in a few seconds. They need to effectively combat fraud, with an intelligent neural network system and still communicate on the customer’s preferred channel, at the time when they can be reached.
With the growth of fintechs, banking institutions are facing unprecedented competition. Every day, they are forced to implement innovative technologies to meet the needs of users who are eager for new, more demanding and informed services, and also to avoid being swallowed up by fintechs. Proof of this is a study by the Brazilian Federation of Banks (Febraban), which showed that, among the 10 largest global economies, Brazil ranks seventh in IT spending in the banking sector.
Content
But do fintechs destroy or benefit banking institutions?
What do new users want?
But do fintechs destroy or benefit banking institutions?
Although banking institutions have felt threatened by the growth of fintechs, which have taken over the space that was exclusive to traditional banks, the paradigm shift has brought positive consequences. Restricted to offering standard operations, banks were not very innovative until the emergence of fintechs. Therefore, they contribute by encouraging banks to work with more technological tools.
In addition to exploring the possibilities of using new technologies, banks have also started to invest more in security to protect their customers' information. In the search for security and agility in the development of these solutions, many banking institutions, instead of facing competition with fintechs, have preferred to partner with them or invest in partnerships and acquisitions of startups , transforming them into acceleration and innovation tools for their businesses.
This entire scenario represents many opportunities for fintechs, whether it is the creation of technologies for communication with customers or for financial services themselves. There are many fields to be explored and, therefore, partnerships have been a way to create solutions and services together.
Software development, user experience and financial know-how are some cpa mailing lists of the areas in which fintechs operate, offering complementary technologies. The result is advantages for banks, which benefit from having cutting-edge, specialized solutions with high connectivity potential with their legacy and new applications.
What do new users want?
New user behavior is undoubtedly the factor that most drives banking institutions to offer modern technologies. But what do these new users want? In short, a surprising experience that does not generate frustration.
As an example, we have the issue of a credit card. There are numerous companies that offer cards, but the customer experience is what sets them apart. Behind a simple use by the consumer to pay a bill, there is a large technological structure capable of verifying information and authorizing the transaction . However, this structure is not always well used, which creates a problem for the customer.
Consumers don’t want to know about the technology that makes it possible to use their cards. They just want a service that works and doesn’t cause frustration when paying a bill, for example. They don’t want to have to wait for a personal loan when they need the money, or have their transaction denied when they’re making a purchase that should work. They want to be able to access their banking information from any device, at any time, from anywhere.
Providing this good customer experience is the current challenge in the financial world and the reason for the great success of fintechs, which simplify the lives of those who need financial products, in addition to granting credit to those who did not have it. One example is a startup that operates in Nairobi, Kenya. According to the founder, Shivani Siroya , there are 2.5 billion people in the world without a credit history, rejected by traditional banks. Her company uses the consumer's cell phone to create their credit profile based on their contact list, their relationship with family members and other subjective information, with which it achieved the same compliance rate as a regular bank, using an intelligent process to create an assertive profile of those who need money.
People no longer have the same loyalty they had 30 or 40 years ago when opening a bank account. Users, known as millennials or Generation Y, want ease, agility and personalized services that meet their specific needs. If the service does not meet expectations or the competition offers something better, they switch immediately.
Faced with this reality, banks with legacy systems and complex technologies are struggling to increasingly increase their profitability, which involves, among other things, attracting more good customers, avoiding fraud and reducing the collection portfolio. All of this in a fast and efficient manner. In short, the modern institution must be a facilitator between what the customer wants and the language they understand. Those who fail to offer this lose money.
To achieve this positive experience and keep their customers satisfied, banks and financial institutions must integrate their technology and create credit intelligence, with cutting-edge analytical models and business rules that can be changed in a few seconds. They need to effectively combat fraud, with an intelligent neural network system and still communicate on the customer’s preferred channel, at the time when they can be reached.