Banks vs Fintech

I know, I know, this ‘banks vs fintech’ sounds sooo 2017. I would have thought that there is nothing to discuss there any longer. But what do you know, it is early 2021 and the first payments-related Clubhouse room I get to speak in is exactly about this imaginary confrontation.

People seem to be interested in my opinion on the subject, so here are my multi-faceted views on this relationship.

As a solid bank that is 200 years old, servicing several generations of one or many country(s) citizens and businesses, I do not see any menace. I see perfect opportunity not to try too much, stay put and enjoy the catfight between the neobanks, the PSPs, the fintechs. It benefits me. I will be the one who they rely on for their own banking accounts. I will be the one who manages their funds, moves their money across borders, stores and makes profit. I will be the one deciding if they can have USD accounts or not (hello The Clearing House). Hell, I will throw in a couple of investments myself every now and then.

Am I not Gen Z oriented? Yes. Does it take me 30 days and tons of paper to decide if somebody’s getting their loan or a card? Absolutely. Do I ignore any chip technology or ApplePay technologies? You bet. Does it mean I will die and lose customers? No. These neobanks and fintechs are my customers along with all the end-users they acquire. Perfect sales outsourcing.

As a small domestic bank with no international ambitions, I have to find my place and niche on the very local and very specific banking landscape. Every country is different in how their habits, regulation, history has shaped the problems that neobanks and fintechs are solving just in one certain niche. There is no copy and paste. Chinese problems are not equal to EU, EU are not equal to Russian and so on.

If I am one of many banks and we are more or less equal in market size, then we can either agree with each other and not to compete, not to let our customers know there could be some better life (hello, Netherlands). Or I can go into competition with the fancy newcomers, adopt new technologies, win more market share. And service those hotshots too.

If I am a tiny bank on the market that has a dominance, then I probably have no other choice but to become the fintech myself. Go over my own head. Invent, adopt, push, learn (hello Russia). There won’t be any versus then.

As a PSP (payment service provider) or a neobank or other fintech I want to first — survive the first months and years. Then to grow quickly and what’s important — expand internationally while I am hot and famous. I then want to win the Facebooks and Googles of the world or the hearts of newborns, teenagers, and adults — whoever is my target customer. I want to become top 1–5 in my market, go to IPO or get acquired. Then probably die peacefully and let others go through this cycle. Or become banks themselves.

The banks are my infrastructure, my partners, my friends and my competitors, the hand that feeds me, the hand that can choke me. That is a very emotional, symbiotic and ever-changing relationship. Fintech cannot live without banks. So you have to be nice and useful for them, while you are slowly becoming too strong to lose you.

As a government or a Central Bank I want to make sure that my budget, my job and my country’s (or certain people) well-being is not threatened. I want to keep up my borders from dissolving, I want to gather taxes, I want to not have any chaos, revolution or anything that will knock me off. I am the top manager, so I will involve to boost up what I see as beneficial and to stop what I see as a threat to myself. Banks do not want to keep up with time? Lets support fintech (hello PSD2). Fintechs are getting out of hand and my population money is flowing out of the country? Well, lets stop that. Let the life happen, let the markets develop, I am the one who makes the rules.

As a customer I just want to be happy. That means to be serviced in a safe and convenient way. If I ever got a taste of how things can work better than before, I do not want to go back. It is 2021 after all. I want face recognition, voice recognition, AI personal assistance. I do not want to wait on anything, I want human (!) customer service real-time 24/7. I do not want to touch a plastic card ever again, and are you kidding me with cash? I want invisible payments, integrated payment experiences, smart personal and corporate finance management.

Hassle-free onboarding. I want free money, no commissions, loans based on my transaction data. I do not want you to ask me for card data or business reputation letter. I want you to do your job well and not to eat up my margin. I do not want to worry if my money is safe with you, if you won’t take them and leave. I simply want you to bring me a feeling of safety and positive emotions. And to interact with all you banks and fintech only occasionally and not too much please, because you are boring as hell.

So basically I will choose that bank or fintech that makes me feel safe and happy. And do not get me wrong, those are very different things for different people and businesses.

So in conclusion there are many ways to look at this relationship, depending on the point of view. Well, it is true about literally any other topic.