Considering its practically meteoric rise from a simple payor platform to the global profile it has today, it’s easy to forget PayPal’s humble beginnings. Who could have known back in 2000 that the scrappy e-commerce service would become one of the most popular and recognizable fintechs in the world? Today, the economy is even more securely entrenched in tech, and the financial industry is becoming more inundated with startups that aspire to emulate and even surpass PayPal’s success. They’re vying for the same business banks and credit unions serve, leaving some wondering how seriously we should take fintechs.
Arguably, calculators and bookkeeping software could be considered fintech but, these days, the term refers to the advanced technology that automates or improves financial services. It’s also what the companies that develop and sell that kind of specialized tech are called. According to Forbes, fintechs are nudging their way into all corners of the financial industry, including credit and debit card processing (Stripe), credit card and loan services (Credit Karma), and even stock trading and EFT’s on-the-go (Robin Hood).
Fintechs’ Intrusion into Consumer Banking
As recently as a decade ago, fintechs were viewed as a novelty, businesses that might capitalize on short-lived trends, but that would eventually fade away. To the disappointment of a large chunk of the financial industry, the bothersome little startups not only didn’t disappear, but they grew up to become daunting rivals. The secret of their survival and growth is that they zero in on one or two services a financial institution provides, and offer them faster and at a discounted cost. It’s why consumer banking is experiencing the highest penetration of fintech in the financial industry. Though not all fintechs directly compete with traditional financial institutions, some of their services overlap:
- Avant—offers fast, simple loans online to people with low credit scores
- GreenSky—lets contractors cut out the middleman and provide financing to their customers for home-improvement projects
- Prosper—like a dating site for people who need a loan, only it matches up borrowers with investors to front them the cash
- SoFi—another loan-focused fintech, but this one concentrates on personal loans, student loan refinancing, and other services that appeal to Millennials
If You Can’t Beat ‘Em, Join ‘Em
Because they’re already playing a significant part in the banking and financial field, it’s clear that fintechs aren’t going anywhere—except maybe up. That doesn’t mean they’re a force to be feared. Actually, with everything fintechs have to offer, the wise move would be for banks and credit unions to collaborate with them. The obvious first step is to implement products and processes that improve customer experience, and while financial institutions do have good digital services, there is room to improve. However, it would be smart not to overlook other fintech developments that could help smooth out back-end procedures.
In such a highly regulated industry, Regtech is an ideal example of fintech banks and credit unions can appreciate. Actually an offshoot of fintech, regtech is the technology that helps ensure financial institutions stay in compliance with government regulations. Since regulations and compliance is typically what slows the financial industry down, this area of fintech could be a prime catalyst for generating a mutually beneficial relationship between financial institutions and fintech, not to mention the trickle-down benefits to customers.
Finding a Fintech That Fits
What technology would best serve your financial institution? Are there any improvements to procedures behind the scenes that would benefit your customers on the front-end? What services and conveniences would improve the customer experience, specifically and overall? It’s easier to implement the right tools when you know which ones your customers are looking for, and that’s something Avannis can help with. Through years of development, we’ve created digital tools and customizable surveys that offer an in-depth understanding of what customers expect, what will help them, and how you can improve the customer experience. Contact us today to find out how Avannis can help you sort out which fintech processes and services would best meet your customers’ needs.