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by Yap Heng Kiong
Impact of Fintech to the Banking Industry
The Fintech revolution is fast transforming the way how customers access financial products and services. With the increased use of smart phones and the development of mobile apps, Fintech managed to penetrate the market at an accelerating pace. New products and solutions offered by these Fintech firms have caused the financial sector to experience a good degree of change in recent years.
Just like how Amazon is disrupting the retail industry and Uber to the transportation equivalent, FinTech is gaining significant presence and causing disruption to the traditional banking industry. An April 2016 article "Fintech is Shaking up the Banking and Financial Services Industry in Singapore", listed the key Fintech ecosystems and their impact on traditional banks and financial services.
Leveraging on technology, Fintech solutions promise easy to use and provide new services at lower cost which banks cannot yet rival.
While banks are counteracting by investing heavily to compete in order to narrow the gap, many Fintech startups are simply willing to operate at a loss in order to gain market share. Challenges which Fintech Companies Face
Many Fintech companies are struggling to justify their high costs of existence. Apart from the cost of people, the relatively high cost of solution development and customer services are pushing Fintech firms to work on tighter budgets.
Besides focusing effort to develop core services and build products to improve the customer experience for financial services, more Fintech startups are struggling to stay on top of their operational costs
No matter how great an innovation is, it will not sell itself. As VC investment into Fintech slowed down, things are becoming tougher for Fintech startups.
As Fintech startups see a pullback in VC fundings, it is becoming more difficult for them to secure new fundings. As mentioned in my previous post, Can Fintech Startups Stay Profitable Without VCs, it is questionable whether Fintech firms are actually profitable. On top of that, most Fintech companies usually provide service-based financial solutions with arguably intangible offerings. Describing their potentials with a clear value proposition and little obfuscation then becomes even more difficult.
The Future of Fintech
So much has been mentioned about the death of banks as consumers are swarming towards Fintech products and services. Banking is transforming itself because of Fintech. The disruption is real. But to claim that banks are dying could just be an overstatement.
In all likelihood, every month you would see a new Fintech startup receiving huge fundings. For every successful one, there are even more Fintech startups struggling everyday just to stay in business. On the other hand, banks are trying their best to win back customer trust. To enable them to stay ahead of their immediate competition and thrive in this period of change, there is plenty of opportunity for traditional banks and Fintech to co-exist. Collaboration between Banks and Fintechs could well be the best way for banks and Fintech start-ups to succeed in this journey.
References
http://www.fintechbd.com/the-challenges-ahead/ https://www.seedrs.com/learn/blog/entrepreneurs/five-challenges-facing-fintech-startups-that-could-provide-big-opportunity https://www.bba.org.uk/news/bba-voice/what-is-the-long-term-impact-of-fintech-on-banking/#.Wb5llEqCzVp http://www.us.confirmation.com/blog/fintech-and-banking http://www.whitlockco.com/fintech-and-your-bank/ https://www.cio.com/article/3148756/leadership-management/the-fintech-effect-and-the-disruption-of-financial-services.html https://www.forbes.com/sites/nikolaikuznetsov/2017/04/07/collaboration-is-the-way-forward-for-banks-and-fintech/#68ecf6a26fdb
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