Introduction
New technology has always impacted the financial sector, and in recent years, the conversation has centered on the comparative advantages between Banks and Fintech. For a long time, customers have condoned the lack of technology found in traditional banks. However, with the rise of Fintech, these startups, mainly known for their innovative technology-driven solutions, are giving banks a run for their money. The question is, will it be Banks vs Fintech? Or can they join forces to build the financial services that modern consumers are looking for?
Remita, a prominent fintech startup, stands out with its industry experience and active pursuit of emerging trends to effectively meet client needs. It is one of the leading fintech startups in Nigeria, offering innovative solutions that facilitate seamless transactions for individuals, businesses, and government institutions. It’s strategic penetration into various sectors of the country, from education to medicine and even salary disbursement, is a testament to its versatility.
In this blog post, we will explore the Banks vs Fintech rivalry, shedding light on the pros and cons of each of them. At the end of this article, you will have a clearer understanding of the relationship, differences and similarities between Banks and Fintech.
Traditional Banking
Traditional banks are financial institutions licensed to accept deposits and provide loans to individuals and businesses. Some Banks offer other financial services, including safety deposit boxes, currency exchange, and asset management. Banks operate under a regulated framework and are recognized for their reliability, fidelity, and long-standing presence in the financial system.
Central banks are the institutions that uphold the aforementioned regulatory framework to ensure visibility and communication within the economic system. They oversee a nation’s monetary supply and policies. However, the primary goal of the central bank is to provide their countries’ currencies with price stability by inflation control. A central bank is the sole provider and printer of currency notes. Central banks can best function in full capacity by remaining independent from government policy and any political regime.
There are various types of banks, such as corporate, retail, commercial, investment, and private. These diverse banks cater to different customer needs, offering specialized services and ensuring a comprehensive range of banking options.
Benefits of Banking Solutions for Business
Traditional banking solutions have long been the blueprint of financial services due to their long-standing and trusted approach to financial dilemmas. Here are the benefits of traditional banking solutions for business.
- Comprehensive Financial Services
Traditional banking offers various financial services tailored to meet businesses’ diverse needs. These include loans, asset management, treasury management, and trade finance. They help provide businesses with the tools needed to manage their finances effectively and bolster expansion.
- Relationship-Based Approach
Traditional banks employ personalized approaches to foster long-term relationships. Certain individuals or businesses have the luxury of choosing a staff member who is usually an accountant to handle their financial transactions at the bank.
- Trust and Stability
Traditional banks are known for their trustworthiness and stability. These qualities are essential for retaining a fitting relationship between banks and customers. Mutual understanding in the financial sector keeps customers sane during recessions and market volatility.
Fintech Overview
Fintech, short for Financial Technology, represents the innovative use of technologies and business models in designing and delivering financial services. It helps individuals, companies, and business owners easily manage their finances using software. Some contributions of fintech are;
- Mobile Payment Application
Since their inception, mobile payment apps have helped reduce physical customer presence in banks. Remita, recognized for being a solution-driven company, allows merchants to accept payment from any location and mobile device, making it the perfect solution for service providers contending with payment issues.
- Bill Payments
Bill payments are paramount to any individual or business with financial obligations; bills can be challenging to pay depending on the financial priorities of an individual or business. But who says it cannot be easy?
Remita bill payments are powered by the Remita Agency Banking Platform, an advanced agency banking system that helps perform several operations for clients. These operations include vending, cash in and cash out, airtime, data and electricity bill payments, RRR payments, wallet and balances, cable TV, government bill payments, transaction history and other bill payments.
- Crypto Exchange Currency Platform
Cryptocurrency utilizes blockchain technology for secure transactions, digital asset management, and decentralized finance applications. Examples of cryptocurrencies are Bitcoin, Ethereum, and Tether (USDT). This means of payment improve user experience by promoting transparent peer-to-peer relationships between debtors and creditors using wallet addresses.
- Robo-Advisors
Robo-advisors are bots that provide personalized and automated advice to customers who wish to purchase assets. They use large analytic algorithms and large amounts of data about the customer, together with current market status, to make optimal investment decisions. Robo-advisors automate data analysis using machine learning and Artificial Intelligence (AI).
Benefits of Fintech Solutions for Businesses
The emergence of Fintech has provided optimal ways of handling financial dilemmas, from the hurdles of accessing efficient banking services to the need for more personalized financial solutions. By adopting Fintech solutions, businesses can streamline their payment operations, increase efficiency, and provide seamless customer payment experiences, ultimately driving growth and expansion. Some outlined benefits are:
- Enhanced Efficiency
Fintech solutions optimize business operations by reducing manual errors and automating repetitive tasks. For example, digital payment platforms allow businesses to process transactions swiftly, saving time compared to traditional payment methods.
- Improved Customer Experience
Fintech solutions empower customers with easy access to financial services anytime, anywhere. For instance, mobile banking apps provide a convenient gateway to financial management, offering a user-friendly platform that put the control of finances in the hands of the user.
- Improved Access to Capital
Fintech platforms offer alternative lending options, such as peer-to-peer and online lending. It enables Small and Medium-sized Enterprises(SMEs) to access capital for expansion without the hassle of extensive paperwork and strict requirements often encountered in traditional banks.
Core differences between Banks and Fintech
Fintech startups and Banks are players in the financial field that offer different services because they both possess distinct advantages over one another. There are various dissimilarities between fintech and banks, but here are some notable ones to remember for clarity.
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Parameters
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Traditional Banks
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Fintech
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Business Approach
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The regulatory frameworks restrict their ability to leverage new technology.
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Fintech is innovative and customer-centric, making it more accessible to people.
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Risk Factor
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Traditional banks are less risky due to their long-standing and trustworthy financial protocols.
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Fintech is more risky due to its flexible nature.
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Cost efficiency
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Traditional banks may incur higher operational costs due to the maintenance of physical branches.
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Fintech companies operate with lower overhead costs, leveraging digital platforms for service delivery, which may lower customers’ fees.
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Speed and agility
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Traditional banks face challenges adapting to rapidly changing market demands due to their large size and established infrastructure.
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Fintech companies excel in agility and speed, leveraging innovative technology to provide quick and efficient financial services.
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Growth Potential
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Banks have limited market distribution but are acclimating to changes in customer needs due to the rise of fintech.
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Fintech has been able to cover more ground due to its ability to adapt and adopt new trends and technologies.
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Regulation
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Traditional banks are regulated by the central banks of their respective countries.
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Fintech companies do not have one particular regulator, making it easier to implement changes without strict guidelines
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How Fintech Disrupted Banking and Finance
The rapid rise of Fintech was inevitable because customers valued convenience and speed over potential risk. Fintech also emerged on top because it reaches the unbanked. According to statistics from the World Bank, two billion people worldwide do not have bank accounts but have access to a smartphone. The reason for this is that millennials and genz’s prefer the use of mobile wallets rather than traditional bank accounts because they are more accessible, faster, and more convenient.
During the pandemic, thousands of physical bank branches shut down or reduced their hours. However, this shift also brought about a silver lining: bank customers discovered the convenience and flexibility of mobile banking from home or on the go. This transition to digital services has become the predominant way most individuals interact with their primary financial institutions and holds immense potential for the future of banking. While posing a considerable challenge for Banks, this development also presents a unique opportunity for growth and improvement. Banks, notorious for operating with outdated systems, now have the chance to bridge this gap and enhance their services.
Instead of banks competing with FinTech in an area where they are at a disadvantage, banks can partner with FinTech start-ups and integrate specific digital services, such as bill negotiation, data breach and ID protection services .
Can Banks and Fintech Companies Work Together?
Traditional banks could benefit from Fintech innovation and, in return, provide customer confidence and established networks for Fintech. In the long run, it will be a win-win situation for Banks and Fintech because where one is lacking, the other is not.
Can Banks and Fintech companies work together? YES. There should be no competition between these organizations. Instead, Fintech and Banks should join forces to make a more significant impact. Although banks have been in business for many years, they must make significant alterations to stay abreast of the changes happening in the financial sector, and that is where fintech innovation comes in.
Conclusion
Ultimately, the competition between banks and fintech is healthy, forcing both sides to stay on top of their game. However, it is clear that collaboration offers significant advantages, and we can expect to see more partnerships between banks and fintech in the future. By embracing collaboration, Banks and Fintech can work together to create a financial industry that is more innovative, customer-focused, and resilient.
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Just create time, even if it is 1hr a day