Banking or Banks?

Abstract – This article is purely from my own assumptions and experience no where related to any conclusion. focused on the issues, developments and trends around banks, banking, fintech & financial services mediums. My understanding out of everything going on around the world on various options of payments front I must say we should avoid a creative mess, stop innovating and start improving. As test, measure success and repeat that what works for me very well (Off course Innovating process does not stop completely). Developing something new on top of other "things" is not always the answer; sometimes un-developing something existing to uncover the hidden gems already there is useful. Can I say if you like Un-Develop to Innovate? 

Financial services / payment services have just started growing & as the current market and daily needs are shifted to more digital channels, Mobile Wallets as one of the solution to welcome this scenario. As rightly said by many experts in interviews and writings, more transactions yield more revenue. Financial inclusion is all about accessibility and affordability but the fintech objective is not the same. In this era of service excellence we need to put ourselves in customers shoes to gain and get the correct experience. Some fintech companies provide convenience and as a result they are attracting more customers while banks even if they claim to be cheaper in some cases but they have less customers as they lack on convenience, accessibility, availability and affordability.

Convenience among other things focuses on how easy it is to access MFS or fintech agencies fruits, how easy it is to send and redeem funds, the network of the MFS etc. Thus subscribers are praying for a balance in both and fintech taking full advantage and act like god. The more innovative banks are the lesser the need for other solutions. Fintech is doing its role very effectively even joining forces with the new competition. Neither banks nor any other stakeholder can do it alone, to get to scale and truly build long standing relationships with the different segments, collaboration with a range of ecosystem partners is absolutely critical. Cross industry partnerships present an opportunity to offer complementary financial and non-financial products which service providers might not have been able to offer otherwise. So here come Fintech please welcome it.

Question is – “Is it possible to separate banking from banks?”, its like pulling blood out of a living body. Answer is known and it brings sadness for some and happiness for some, yes its happening already.

Introduction – Fintech, the most advanced and recent innovation or a transformer for payments world to transform Banks to MNO to Digital World (FinTech World). Financial technology, also known as FinTech, is a line of business based on using software to provide financial services. Financial technology companies are generally startups founded with the purpose of disrupting incumbent financial systems and corporations that rely less on software. Indeed financial inclusion has to be sensitive to cost and convenience. The services have to be affordable as in most cases the people being targeted had been excluded by financial institution because of their locations, economical standards, informal environments or in some cases they would have been forced out due to KYC and account maintenance fees. 

There is a very old philosophy of door knocking by opportunity and making door for opportunity but the way I see this is totally different. First scenario - Knock Knock … who is it FinTech... Bank (Feeling very lazy and suspicious)…. shut the door on its face. Now look at second scenario - Knock Knock … who is it FinTech …. MNO …. Got exited, welcomed with open heart, mind, and arms. Because Fintech was never treated respectfully by banks so now Fintech is killing banks but not banking.

FinTech a sweet dream - It is the delivery of financial services at affordable costs to sections of low-income segments and informal sector of society, in contrast to financial exclusion where those services are not available or affordable. The concept of daily banking or transactional banking relationship to one in which banks will offer a variety of digital services that will increase the daily interactions of MSMEs. But to get to the honeypot, the sign up procedure needs to be online, fast and simple. Credit decisions need to take minutes, not days. Customers need to be able to conduct their business as efficiently and productively as possible. 

Main Story – Over the years, the Fintech industry has acquired extensive experience in addressing Africa’s business needs, consumer needs, technology challenges and has continued broadening its boundaries, scales and improving peoples lives by providing and developing a broad range of innovative solutions and services. On the other hand, banks with their restrictive approach when it comes to on boarding customers, It means that in this world all typical bankers have failed to understand/establish the change in basic business model because of their restrictive approach. I am very comfortable in saying this "Banking is needed not the banks, Fintech is killing banks not the banking".

Banks need to accept change, become Fintech partners and its time to come out of their 100-year sleeping mind/blind folded approach to customer’s banking need otherwise banking will only survive but not banks any more. Since the mobile payment era has just started, it is still too early to answer this point and nominate the winner, we will need to wait and see how it will go but I think we will somehow end in a stalemate, which is not at all pleasing for one type of role.

Mobile payments under the fintech market will grow exponentially. We are sure that both players will adopt the mobile device (To run on internet/data based mobile apps) or actual mobile phone (To run on GSM/3G/4G network) as an official and convenient gateway for their financial requests and we will see unlimited options and innovative solutions that are built and based on mobile handsets. Leveraging digital channels and operations will allow banks to also reduce the cost to serve the market, whilst acquiring new customers and increasing profitability but bankers still think its not enough and they still needs a compelling digital value proposition, incorporating financial and non-financial needs that will help customers grow their businesses and improve their own needs. Demand for upstart services is strong, piqued by widespread frustration with big banks; supply was/is growing, fuel in part by financial types itching to do something. Low interest rates have made capital, the raw material for many money-related startups, cheap and plentiful. 

Fintech industry came to life and became one of the Most Promising Industries of 2015 and looks very confident to continue in the same light in 2016 and few years more. "It wasn't an interesting space to be in just in 2012 as I recalls. "The view was that there are just such strong monopolies there in terms of the existing banks and no one's built a successful payments company since PayPal and plastic money companies." MaRS’ Financial Technology (FinTech) Cluster connects the financial services sector with startups developing next generation technology in emerging payments, financial services, peer-to-peer transactions, alternative lending and crypto-currencies.

Fintech startups are the most comprehensive set of resources across the world and their vision is soothing to world and people life that gave it another reason to live long and grow in folds. Killing everything what comes in way of innovation. Through a strategic network of partners, technologies, tools and people with vision the FinTech entrepreneurs with rapid validation, access to investment, product feedback, sales opportunities and business advisory services.

In that time, it was seen as a highly technical highly regulated industry dominated by giant banks that resist disruption, other than the occasional global meltdown; finance is now riding an entrepreneurial wave. financial technology as "innovation in financial services" at first targeted the banking and insurance sector as potential business sectors to disrupt. If you tried to open a new bank account you will be requested to deposit a sum of few thousands in case of Asia and in Europe & Americas few hundreds in average-of your local currency, while with only few cents you can get your self a new SIM card and start transacting immediately. FinTech companies often face doubts from financial regulators along with tough competition from established players. The online financial sector is also an increasing target of distributed denial of service extortion attacks. This security challenge is also faced by historical bank companies since they do offer Internet connected customer services.

Despite all challenges, issues & natural and industry created bottlenecks, FinTech is experiencing tremendous growth. FinTech is on the rise boom within the sector is exponential. FinTech startups enabling services like peer to peer money transfer, instant payment for goods and services with help of mobile device based services like Mobile applications, USSD, NFC, QR Codes etc. And lending services are also on the rise. FinTech companies got billions of us dollar funding in just last 12 months which is a very clear sign of confidence and bright future. FinTech present enormous opportunity for entrepreneurs in Insurance and shows that incumbents are recognizing the potential for startups in the insurance sector. Despite being such a large industry, insurance remains one of the highest cost areas of financial services.

According to some data from google it shows technology based innovative insurance companies trust and invest in FinTech, $.60-$.65 of each dollar is paid in claims, with the rest covering costs of admin, marketing and reinsurance. This presents a significant opportunity for disruption. With improvements in technology, we should see reduction in each of these cost items. Examples include automating policy administration, improving distribution via marketplaces, reducing underwriting risk using big data and machine learning. Recently, more and more entrepreneurs have launched startups to disrupt this massive and antiquated industry.

Conclusion – FinTech faces issues on convincing the controllers and often hit hard by regulators, as there is no such thing “Ministry of innovation” which is actually support them. Data security is another issue regulators are concerned about because of the threat of hacking as well as the need to protect sensitive consumer and corporate financial data. Any data breach, no matter how small, can ruin a FinTech company's reputation. So is it a sweet ravage of FinTech from banks or some other agenda; I guess we all need some time to wait and watch this this space. Well said by some one somewhere on Internet may be by payment research managers/innovators "Apple does not care what the banks think. Why should they? What do banks have to offer them?". This was when Apple Pay was launched.

Banks have to follow compliance policies in true spirit even some banks prefer compliance on business whereas in Telco business is preferred on compliance so they don't care about compliance, this is one of the reason banks will never be successful until they revise the compliance strategy according to market demands otherwise they will be struggling. Fintech is transforming technology, financial industry and people life but Marketing is another challenge faced by most of FinTech companies; as they are often outspent by larger rivals.