Banking And Fintech Collaboration: Does The Road Less Travelled Hold Potential?

Summary

• Banks are increasing adopting fintech solutions, and coronavirus pandemic has fastened the rate
• Usage of online banking by adults in Britain jumped from 72 per cent in 2018 to 80 per cent in 2019: UK Finance
• Neobanks or ‘digital-only banks’ are taking over traditional banks
• Fintech platform improve customer experience, eliminate serious crime using data analytics, provide collection and recovering solutions during Covid times, and improve financial inclusion

The coronavirus crisis has led to a massive jump in use of fintech applications, not just in the UK, but around the world. And with the new normal forced upon by the pandemic, the big leap in the fintech usage is here to stay. In fact, it could be here for good as companies are increasingly realising the benefits of adopting fintech solutions. This boom is partly attributed to the fast rise in the overall usage of digital technology.

The banking industry has particularly benefitted from the fintech revolution during the corona times, aided by high-tech applications of machine learning, blockchain, and artificial intelligence. For instance, as per the estimates of UK Finance, the usage of online banking by adults in Britain jumped from 72 per cent in 2018 to 80 per cent in 2019. While the figures for H1 2020 are awaited, but according to market estimates, they have gone up further for sure. UK Finance is the leading industry association for the country’s banking and financial services.

How Fintechs have eased business operations?

So how exactly have the fintechs eased business operations for banks and their customers? Let us try and take a sneak peek.

A couple of years back, setting up a bank required fixed assets like branches to scale operations, but not anymore. Thanks to the advancements in the financial technology space, even start-ups can grow fast by scaling up operations in a virtual manner. Neobanks or ‘digital-only banks’ have now taken over traditional banks. No need for long queues or paperwork, just use the web to access your money with handy features such as saving pot and expense tracker.

For instance, UK based digital-only bank Revolt has acquired 12 million customers across 35 nations without any live customer interface, through its easy-to-use budgeting and personal finance app. It was launched in the year 2015 and provides money exchange and transfer services. You can hold up to 27 currencies simultaneously and transfer them very fast globally. The app is very popular as it charges no hidden fees.

Available on the google play store, the app was launched in Australia on 11 August 2020 as well.

Improved customer experience

Close to 90 per cent of fintech firms say that improved customer experience has been the main reason to their competitor advantage.

Banks are increasingly adopting fintech applications for benefits such as faster approval time (sometimes an application and approval process can finish within 24 hours), efficient and convenient transaction, lower operating cost, improved security, and individualised services.

Eliminated serious crime using data analytics

Talking about advanced security protection, HSBC had started to use the services of Quantexa to eliminate the serious crime like money laundering and terrorist financing. Quantexa is a London based fintech firm that aids decision making using data analytics. Its intelligent fintech platform aids HSBC bank in analysing the data in a dynamic manner and detect suspicious activities and relationships by users.

Setup in 2016, the fintech has rapidly expanded its contextual decision intelligence technology across the public sector and financial services firms after the coronavirus stuck the country in February 2020. It is rapidly expanding its global interface across the Asia-Pacific, Europe, and North America, and recently raised funds worth £51.2 million for the same.

Provide collection and recovering solutions during Covid times

The banks-fintech collaborations have evolved to new levels during the unprecedented times led by the coronavirus crisis. For instance, headquartered in Edinburgh, Scotland, DirectIDhas has launched its collections and recovery solutions for banks, debt collection firms, and financial institutions. These solutions are streamlining and simplifying processes not just for its clients, but also for the customers.

The solution has minimized the entire collections process from weeks to minutes now. This is a big sigh of relief to individual debtors, who are already stressed out about their dwindling finances.

Improved financial inclusion

Extending financial inclusion is a unique trait of fintech firms. As an example, Channel VAS, the global fintech company providing mobile financial services, uses its mobile technology solutions to eliminate barriers proposed by traditional banking. The company has been successfully providing financing services to people in far off and isolated locations. It has also been able to bring low-income households under its purview, who lack any credit history.

The firm has seen rapid growth during the Covid-19 lockdown period and aims to cover a large proportion of the entire unbanked population across the globe.

Conclusion

The fintech applications have undoubtedly come up as a handy tool for banks as well as their customers. The industry has shown its mettle in the coronavirus pandemic times, and have strengthened its customer interface by providing services such as faster approval time, efficiency, convenience, lower operating cost, improved security, and personalised services.

While the fintech-banking collaboration is not new, but the potential of mutual collaboration has definitely improved multi-fold after the coronavirus pandemic hit the nation. While in next three to four months we could see some consolidation within the fintech industry, with weaker players giving way to stronger ones with clear, aggressive and well-planned strategies in place. At the same time, the established banking players, have now realized the value added by fintech firms, having worked closely with them. Hence, going forward, these banks might plan to acquire some of these firms.