Fintech is the 21st century finance. Although it is related to the old form of banking, it is still very different from it. With the rise in fintech, there is an opportunity of growth both for the financial institutions and the fintech companies alike. However, the need of the hour is to strike a profitable alliance between the two through the mutual benefit of collaboration. The need of the hour is also to understand whether it is a ‘Lending Institution’ where technology is seen as an aid or is it a ‘Technology company’ where technology is seen as a substitute.
Fintech is not a new kid on the block, instead, it is as old as the traditional banking system is. The only difference is that the financial institutions have maneuvered their working style and made it more technology driven to reach the end user.
Financial institutions are endowed with some natural advantages. Like:
- Teams that understand regulation and how to work with regulators
- Expertise in running low-margin services at scale
- Highly proficient at expanding into new markets and operate globally
- Emphasize security and operate highly secure networks
- Consumer trust despite turbulent market
- Access to reliable customer data
On the other hand, early age Fintech start-ups have certain advantages. Like:
- Venture capital funding,
- Young and dynamic pool of talented professionals
- Access to cool software and technology
With the rise in technological advancement, forward thinking fintech firms and financial institutions are beginning to realize that they need each other to succeed. While early-stage fintech innovators need the support of large established financial institutions for their mighty experience, broad knowledge base and customer data, large organizations need the startups’ new ideas and fresh talent.
It is the synergy between the financial institutions and the Fintech companies that will create a healthy lending ecosystem that will eventually benefit the end-user. There is no denying the fact that both Fintech and Financial institutions cannot sustain without each other and therefore a perfect balance is what is required.
The Fintech revolution has knocked the door, but it should not be perceived as a war between financial institutions and fintech startups. Instead, it should be seen as a strategic alliance between the two, that results in more profit and growth. Both of them have started realizing that they need one another to thrive. A better alliance between the two would surely result in a strong economy and eventually a stronger nation.
It is important to realize that it is a ‘Fintech’ and not a ‘Techfin’, therefore, focus has to be always on offering lending solutions to consumers that fit their needs in a manner that is palatable.
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