The COVID-19 crisis affected the world in various ways and many industries suffered because of it. However, fintech is thriving in this new world. Reports regularly show that the use of different digital banking, investing, and payment solution keeps growing. However, the level of competition is also increasing in this industry. Already some businesses are taking top spots on the market due to their foresight and quality of software development. At this point, even when the pandemic ends completely, people won’t go back to brick-and-mortar bank offices.
Will Fintech Prevail and Push Out Brick-and-Mortar Banks?
Fintech has been getting more popular long before the pandemic crisis started. Online banking, in particular, has become a prevalent digital service. In fact, it has become the new norm of banking services in many developed countries.
Not only are they more convenient but fintech solutions are growing more sophisticated all the time. Also, it must be noted that they do an exceptional job of helping people in many ways. Online signatures facilitate lending and online lenders offer loans where traditional banks come short. But above all, online banking is making all essential banking services available to everyone.
This didn’t use to be such a big issue before lockdowns forced people to stay inside. However, in 2020, the majority of the populace couldn’t access banks at all for months. Of course, this situation was unacceptable. Therefore, every decent bank out there launched an app and a variety of online and remote support services. Although, many of them had those already.
But online banking is not only about getting access to your bank account without visiting the local branch. This type of fintech service is sophisticated and versatile. In fact, many fully-digital banks offer services that go beyond what you can get in a traditional bank. It’s another way in which they make banking more accessible.
These businesses, as well as more specialized fintech companies, enable people with low credit scores to get financing and offer tools, like hedging, to small businesses. Simply put, they take banking services that are only available to VIPs and big corporate clients and offer them to everyone. Many of their more common banking services are also cheaper. Therefore, fintech is offering everyone a chance to use that which they couldn’t afford before.
With this kind of endorsement, why wouldn’t it replace traditional banks completely?
Leading Fintech Companies and What They Are Doing Right
Fintech is incredibly versatile today and each provider that’s fighting for a larger market share offers some great perks. There are leaders of the industry already, such as Ally Bank in the US or EQ Bank in Canada. Those are full-fledged online banks that win over clients by offering good interest rates, very low (if any) fees, and a wide range of additional services.
However, one of the best things about fintech is that even smaller businesses that offer a limited range of services can succeed. For example, in Canada, Motive Financial is getting quite close to EQ Bank despite being more limited. According to a Motive Financial review, this is because it offers great interest rates. Therefore, it immediately appeals to those who want to use high-interest savings accounts from online banks as a safer alternative to investing during these volatile times.
In the US the number of online banks is growing extremely fast, so Ally is facing competition on all sides. Many of the top contenders offer almost identical service lineups and only have minor differences in rates and fees. Therefore, the main contest between them comes down to better marketing. But there are also much smaller fintech solutions like Chime, which offers good short-term savings accounts with a high interest rate. This company addresses a very specific need, which means it can easily win over a whole niche of customers.
The list can go on and on. However, it all boils down to the fact that leading fintech companies either make banking more lucrative for customers or can satisfy some highly specific needs. The end result is that online banks give people more and better opportunities compared to stuffy traditional banks. Therefore, it’s only reasonable that consumers prefer these services.
Is Fintech Truly Superior?
While it’s difficult to say that fintech is superior to old and trusted banks, it’s true that it’s much more convenient. Nowadays, it is a much more important advantage. People live in a rush and more and more rely on digital services to save time. Therefore, fintech is sure to keep growing in popularity.
As it grows more popular, the revenue of these companies increases. Therefore, they are able to invest more in their development. Already many of those who started as online payment or basic lending platforms are turning into almost full-time banks.
However, as they aren’t subject to many restrictions that traditional financing institutions operate under, they can offer better terms. That’s why online banks have cheaper services and better interest rates.
All in all, fintech is in tune with the needs of a contemporary consumer while traditional brick-and-mortar banks are not. The COVID pandemic what the main trigger that highlighted this issue. But it was actually growing for a while. Therefore, unless old-timer banks can evolve fast, they will become obsolete and forgotten.
When considered from this point of view, it becomes clear that fintech has a real chance to outshine traditional banks as soon as 2021.
In Conclusion: The Changed World
Times are changing and there is no doubt that digital services will keep spreading and overtaking their non-digital counterparts. Therefore, no matter what financial goals you set for yourself, you should look for fintech solutions that can help you achieve them. Online banking is the standard now and we can look forward to what new opportunities fintech can offer. Already it is making it easier and cheaper to get loans, manage accounts, and receive/send payments abroad.
All these services are not merely convenient. They also give individuals, small businesses, and sole traders more opportunities, both personal and professional. So, we can only hope to see more beneficial digital banking and other fintech solutions soon.