The Fate of the Financial Sector: Fintech Service Providers vs Traditional Service Providers

It is no secret that, over the years, traditional banks have lagged behind their digital counterparts. High profile IT failures from big banks like RBS and the CO-OPs Smile Bank left many customers turning to tech-savvy fintech services that meet their current banking needs. This process appears to have been accelerated by lockdown measures, forcing millions to stay at home and handle their financial lives exclusively online.

According to the Brandon Agency, traditional bank customers in the U.S. and UK listed banking fees (43%) as the main frustration. Other points of contention include the time-

consuming nature of issuing transactions (31%) and poor customer services (18%). On the other hand, personal banking relationships, something that fintech alternatives don’t offer, remain important to clients (31%). Other points of contention with digital banks include fears regarding the security of their money (22%) and a lack of easy access to credit (20%).

Bearing in mind the technical agility of financial technology service providers and the scale of their traditional counterparts, how do you expect the financial sector to evolve over the coming decade?

Do you expect to see growing interdependence between fintech service providers and traditional service providers or rather a head-to-head competition between the two?

What would you expect to be the impact of the growing adoption of digital currencies and blockchain-based financial solutions (e.g. staking, transaction processing, investing) on the financial sector?

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While some of the banks here in the US have struggled due to CoVid and more people are using online banking, there are several banks being built in my neighborhood. These are banks that have never had a presence in my area before. One is Bank of America, the other is Chase Bank. Many residents are questioning why so manyny new banks, but there must be a reason…

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If traditional service providers do not evolve, they’ll fade away. As with everything else, consumer’s needs change and providers must adapt. To be honest, personal banking relationships do not exist in traditional banks anymore.
Blockchain-based financial solutions are decentralizing and disempowering the financial sector, and in order to survive, traditional providers will have to adopt business models similar to Monzo or Revolut, where these new solutions can be incorporated. The customer experience, financial, and banking solutions are on another level to what has been done in the past. This is changing fast.

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Fintech is the next step in the evolution of traditional banks.
Banks must evolve towards digital, otherwise they will remain in the memory like a newspaper or a paper book.

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There’s actually no bank which already today, is able to compete with the service provided by some cryptocurrency platform because those platforms offers:

  • ZERO managing fees
  • better loan solutions
  • better annual interest rates
  • ZERO lock up time period in order to give you those interests
  • possibility to move your funds in matter of minutes (if not seconds)
  • from next year many of those platform will send credit cards in order to spend they criptos in your account in shops by automatically converting them to fiat.

I guess at this point in time the only advantage common banks have is that people are used to them and in general the average person is not confident enough to try a different solution from that he already knows.

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I think traditional financial institutions will become less significant given the high transaction fees, long queues and slowness to adopt to latest technology. I think they will be used more for corporate than individuals.

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This is another interesting take on the issue:

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The pandemic has served as a catalyst, accelerating the transition towards a digital new norma1. A vast majority of consumers expect to continue to use digital services as often as they do now or even more often.

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This is just one bank, ( of the thousands here in the US). I don’t think banks are going away anytime soon.

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Fintech services have some interesting products but I think the majority of people prefer the tradition and security of the banks. Some more adventurous people would look at the offering of fintechs and with enough popularity they may gather a following. But then there are some massive banks with deep pockets, I imagine if there are any interesting fintechs that get much traction they will just get bought out by one of the big global banks. you may get some more obscure/ niche fintechs going under the radar or holding their ground, But it will be interesting to see if any new big players came along.

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