Monday, December 4, 2023

Banks vs. FinTech – a powerful union or war of the worlds?


The traditional banking business is going through tough times. Loans are non-demanded, deposits are almost dead due to investors’ distrust. Nowadays, people are increasingly turning to FinTech companies, which are readily available, able to quickly adapt to market turmoils.

In this regard, banks wonder: should they try to follow technologically advanced projects, combat, cooperate, or just take a waiting position to witness how FinTech collapses during a significant financial crisis?

If they don’t have an answer, we will try to find it.

What are the main advantages of both structures?

The strengths of banks are knowledge of clients, compliance with requirements, security, and huge experience. The advantages of technology enterprises, in turn, are their agile approach, technological supremacy, and the ability to quickly adapt to shifts.

However, a part of FinTech’s success lies in lax industry regulation which makes companies agile in the decision-making. This industry is still not tightly regulated in comparison with regular banks. As a result, FinTech now has some advantages, but it also shatters customer confidence.

Banks, on the other hand, are a built-up business or a capable organizational structure. They are more resilient, dynamic, and accurately react to changes in market conditions due to experience.

Why is it better for banks to cooperate with fintech rather than compete?

As soon as FinTech made its name publicly, and millions of users around the world began to use its products, many experts predicted that innovative and flexible companies from the financial technology sector would defeat banks. But time goes by, and instead of the struggle between FinTech and banks, we increasingly see their cooperation. Why?

  • In partnership with banks, financial software development companies can offer their services to a wider audience. Collaborating with newcomers gives banks access to a new customer base and new sources of income.
  • Banks through white-label fintech platform receive new points of sale, and most importantly, new technologies, increasing the speed of development of innovations in the industry. Among them are solutions in the field of combating money laundering, user identification, including those based on biometrics, as well as artificial intelligence systems.
  • FinTech projects get direct access to banking clients and mitigate their cyber risks.
  • From the point of view of consumers, the gain is also obvious: competition between banks and FinTech leads to high-quality product offerings.

Partnership options

55% of the largest world banks cooperate with FinTech in several areas, providing them with the opportunity to scale their business, in exchange for innovations. The partnership is developing in four main areas.

  1. Improving the client interface
  2. Digitalization of processes
  3. Advanced data analytics
  4. Expansion of the product offer


Banks just need to accept the fact that their business model is available for other market players. What they can do in this situation is to interact with FinTech to form a competitive advantage in terms of the customer experience quality and wide range of services. At the same time, FinTech cannot relax. They need to find sustainable, long-term partners with whom they can quickly build the customer base they need to grow further.

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