Fintech is the acronym for “financial technology” and it refers to the innovative use of technology in the design and delivery of financial services. Fintech companies include technology providers which are into financial services and financial/non-financial companies using technology to offer financial services.
Customers today spend a good amount of time online checking mails and messengers on their smartphones. They expect extreme convenience of doing financial transactions like bill payments, fund transfer, buying/selling financial products, making investments, and paying taxes through these applications. Technology companies like Facebook seem to have gained customer trust and confidence. Customers who feel safe in uploading pictures on Facebook feel delighted to perform financial transactions on messenger. Future generations will prefer opening a bank account using these applications as part of their regular use and interaction. This creates a worrying situation for traditional banks.
Fintechs are also able to pick and choose which business within banking they want to get into. They champion user experience, convenience and lower transaction costs by reducing friction in the current banking processes, in the area they choose to foray in. Banks can collaborate with these Fintechs to generate more business to reach out to unbanked population (and others who are able to transact with banks directly) round the clock and provide products customers want to buy based on their profile and lifestyle.
In order to offer better services and new products to their customers, banks have already started collaborating with technology providers to meet their digital objectives by combining a few or more of following different approaches:
Banks are building partnership ecosystems and making banking more accessible by extending its touchpoints to areas that intersect with consumer’s lifestyles. In November 2018, United Overseas Bank (UOB) got into a strategic alliance with Grab (ride hailing giant which is also into financial services) and kick-started many digital initiatives and customer benefits thereafter with Grab offering UOB cards privileges directly on its mobile app and UOB card members enjoying certain privileges when they utilize Grab services. This industry cross-over creates greater value for customers who commute a lot.
End consumers will benefit by this Bank-Fintech collaboration not only in terms of lower costs but also by being able to transact conveniently, control their finances better and experience personalized services.