The first two decades of the 21st century was a revolutionary phase for the banking sector, as processes during the period became automated, centralized, and interconnected in order to scale and also serve the customers with high efficiency. Traditionally banks have been the trusted custodians of the financial value of individuals and businesses, and as a matter of fact, trustworthiness has always been the identity for banking as a business. For precisely this reason, banks never had the need to entice their customers into banking with them.
However with the advent of computers and technology in everyday lives, people and businesses started looking for convenience. The banks were slowly moving into fully digital world when the Covid-19 pandemic struck and consumer consumption pattern changed drastically. Due to this, the industry did not suffer a setback despite an increase in workload.
As the world was trying to overcome the aftermath of the worst pandemic ever, banks and Fintech companies rose to the occasion and delivered hassle free services to consumers right at the comfort of their homes. Right now as we return to normalcy, a few innovations made during the lockdown phase will become a permanent part of life in the future. A 2020 Deloitte study has reported notable changes in consumer behaviour with 96 percent of respondents preferring digital transactions compared to traditional forms. As many as 72 percent respondents preferred online transactions for insurance and mutual fund products,
rather than dealing with traditional banks.
Convenience in every walk of life has become commonplace and it has touched the banking sector too. It all started with ATMs. One can go to the nearest ATM to draw the cash they need at any time of the day or night. Banks would not have been able to provide this without the automation of internal processes. Having done this in the past 2 decades, banks could quickly move to offer standardized APIs for all their services digitally and were ready when the pandemic struck.
The changes in consumer pattern began as early as 2016, when “2016 World Retail Banking Report” stated that almost two-thirds of the retail banking customers across the world use FinTech products or services like cards & payments, loans, investments, financial advice and mortgages. It was only possible because of the UX standards banks offer to their customers. On the other hand, 81% of the customers feel that FinTech offers faster services and extends a great experience.
This change has inadvertently prepared banks to embrace the advent of Fintechs. The Fintechs understand that they need to engage with banks through technology. They need to engage with all divisions of banks – Accounts management, Lending, Trade Financing, Commercial banking, payments, etc, because banks have been the traditional service providers in this field.
However, despite the advancements, technology is a specialized area that the banks will never come to master themselves alongside their core competence, which is banking. This is the strongest reason why Fintechs and banks must collaborate in the age of internet and mobile. This will surely be a perfect symphony that benefits all stakeholders. While banks offer trust, stability, custody, and efficient growth of value, Fintech offers convenience, improved experience, and innovation, all of which result in rapid customer
acquisition with very low Customer Acquisition Costs to banks.
And this gives us an understanding that banking and fintech industry are closely interlinked. While the two may cater to different needs, the end result is to make the decisions related to money matter easier for the consumers. And this is precisely why the amalgamation of the two is necessary for the consumers as well as service provider. It is important to note that Fintech cannot exist without the banks. Not today and not for
another decade at least. Customers still trust their banks to manage their financial value more than any other entity.
There is an ever-increasing section of customers that have demonstrated a willingness to pay extra for a better experience and convenience. The airlines and the hospitality industries have proved this emphatically. Traditional consumers too will be happy to pay a little extra to combine trust with convenience and experience in banking and finance as well. And this will lead to an unprecedented growth in the Fintech as well as banking industry. According to one report, the Indian Fintech sector is poised to reach a $150-160
billion valuation by 2025.
The blog has been authored by Balaji Jagannathan, Director and Founder, Paycorp.io
Bfsinxt.com does not necessarily endorse it and will not be held liable for any direct or indirect damage made to any individual or organisation.
