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Fintech & Banks Or Fintech Banks?

For anyone involved in observing the financial services sector it’s hard not to see the two camps being divided – Fintech and Banks. These camps are normally presented having different views and objectives, and often the views are so opposing that the future predicted for both of them presents the dominance of one. The two sides seem to be pretty clear –banks are often portrayed as being paralysed by complicated IT systems and inability to quickly adapt to customer needs and changing technologies, whereas Fintech seems to be coming to the rescue offering a number of simple, technology-enabling solutions that provide speedy and responsive customer-oriented service. That’s exactly what customers are craving for: due to online presence of the new Fintech businesses, service becomes more accessible, quick and user-friendly as customers can easily navigate, choose and compare the offers despite their location and/or time. But what if there was a third group of players in the future of Financial Technologies services, merging the stability of banks together with digital capability of Fintech entrants? Can Banks and Fintechs avoid the opposing separation and rather work together to revolutionize the financial services sector?

Let’s face it: banks are heavily regulated, outdated and cannot offer speedy, innovative and customer-oriented service. But banks have been the backbone of modern economies since their inception and therefore their sales force and customer service infrastructure are huge. Fintechs, on the other hand, are open, flexible and are successful focusing on segments with unmet needs as opposed to being all things to all people (aka banks). Working together both parties could focus on the value added each party brings: Banks could definitely benefit from new innovative products and focus on tech, whereas Fintech could use stability that banks have created and achieved over time.

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Banks realize that they are not as fast to change and adapt as Fintechs, and therefore most banks have started looking to fund Fintech startups that create products to be added to bank products to improve user experience. Two years ago, in 2014, Barclays launched their own Fintech incubator and Santander set up a fund to invest in Fintech companies. Last year, in 2015, Visa Europe has launched an accelerator Collab. And Godman Sachs, the most famous investment bank, is launching an online bank with a minimum deposit of USD1. The change is happening, but the question remains whether banks will respond, and whether response to the rise of Fintech will be effective?