It has been over 2 decades since Bill Gates stated that banking would be needed however banks themselves would become obsolete. Here we are 23 years later and banks are feeling the pressure from innovative startups, fin-techs and digital platforms cropping up on a daily basis.
The issue with banking mentality.
Bankers feel threatened by new innovative companies and financial technologies, due to the fact that they are perceived as competition. Most traditional bankers and CEO’s are all about risk avoidance and management. Cooperation with different partners or platforms would pose a potential threat to their institutions, in layman’s terms: “If it ain’t broken, don’t fix it”. The matter of fact is that banks already have a preexisting customer base which is an advantage in the short run. The disadvantage however is that this customer base is aging, changing and shifting to make way for the millennials. That is what brings about new innovative ideas to the surface to make lives easier for all consumers.
The demographic shift.
Most of today’s working force consists of millennials, where your modern individual would not survive for half an hour without some form of electronic contact. The banking customers of tomorrow fall within this group of individuals – these are the living, breathing, multitasking clientele who are fluent in an array of different technologies and that – brings traditional banking at a disadvantage.
Within a few years the tech savvy are not going to be waiting in line in a brick building to get a loan, deposit money, or confirm a mortgage the old fashioned way; – especially when they can do it with the swipe of a finger while sitting on the beach with a nice cold one. When it comes to SMEs, millennials are more likely to cooperate with fin-techs as it is faster, simpler and (way) cheaper to attain a smaller loans through the push of a few buttons and the use of algorithms, rather than double checking credit scores and waiting anxiously for weeks for the desired approval.
A viable way for banks to keep up and “reinvent“ their position.
Embrace the change and challenge the fear! Fin-tech companies are the change and at the same time are risk aware through education, and proper research that goes into their company. It is THE time for banks to work together and partner up with fin-techs & startups, and learn from new innovators in order to move forward with trends and ideas that new customers and SMEs will be inclined towards.
Learn More about Partnerships during our Phoenix FinTech Conference in Prague, on September 20th & 21st.