Blurring Lines of Distinction Between Banks and Fintechs

November 19, 2019 | FinTech, News
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Fintechs and techs are trying more and more to masquerade as banks. Should banks take the battle into the fintech camp?

Here’s an interesting viewpoint: Incumbent and traditional banks are “no less” fintech than the technology startups. “We are fintechs,” claims David Rafalovsky, chief technology officer at Russian state-owned lender Sberbank. He was speaking during a panel at CNBC’s East Tech West event in Guangzhou, China, on Monday.

Rafalovsky feels the line of distinction between fintechs and banks is unnecessary and meaningless.

But fintechs and big tech are muscling into banks’ turf

Technology-driven startups such as Monzo, Revolut, and N26 have used apps and online banking to offer cheaper, more convenient, and efficient services. As a result, they have garnered a user base of millions of customers at the cost of incumbent banks.

Big techs such as Apple, Facebook, and Google also have an eye on the financial services they could offer to their users. Apple has already launched a credit card. Meanwhile, Facebook is mulling a digital currency, and Google will soon launch a checking account in collaboration with Citigroup.

Henry Ma, chief information officer at WeBank, said technology brought financial services to the billions of people without access to banking. WeBank is an online bank backed by Chinese tech giant Tencent. Why did banks not reach out to these potential customers? He said: “Banks should behave more like technology companies.”

Its only technology, say the banks

Michael Gorriz, Standard Chartered, said at the panel that the solution was plain: Get the bank’s IT department to work like a fintech. If this fails, “we set up our own fintech companies.”

[This is an aside and off-the panel: HSBC, too, is upping its fintech game. “Over time, we recognized that some fintechs could build solutions much quicker if we developed them in-house… Now our preference is to build less and partner more,” says Omer Ahsan, HSBC’s head of customer propositions and innovation.]

Rafalovsky said that many banks (though not all) are well-positioned to build and launch brand new products. But he did admit that banks need to operate more like Google or Facebook, with products that evolve quickly.

Henry Ma: “They (banks) should invest a lot more in core technology and be competitive once again.”

[Related Story: Challenger Bank Revolut’s Losses Double As Costs Surge ]

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