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◈ The emerging technologies
have played a huge role in
bringing newer innovations in
the banking industry. For
instance, 4G internet and
chatbots transformed the
banking sector massively,
paving the way for a smooth
customer interaction.

◈ Also, at the same time development of online businesses had built the
ground for non-banking online-payment solutions, when the FinTech
firms took the much-needed advantage and created a roadblock for the
monopoly of these legacy financial institutions. With all the disruptions
that are shaping the banking industry by FinTechs, it may be the right
time to discuss the major differences between them and the traditional
banks. The article also outlines how banks are embracing FinTech in an
attempt to become digitally savvy. Nowadays, some of the biggest
breakthroughs in banking are powered by FinTech and FinTech products
from companies like Paytm have gained a lot of popularity. Why the
FinTech-Bank collaboration works is because banks provide a ready-
made infrastructure backed by industry expertise whereas FinTech firms
bring new use cases of technology and agility. There has been
tremendous growth in pan-India payment platforms in the last three 4
years which took digital wallets to the masses.
◈ Purpose:
◈ The most significant difference between FinTech firms and the
traditional banks is the purpose. Fintech products are created by
identifying a gap in the marketplace whereas legacy institutions
like banks cater to the wider audience.
◈ Legacy banks majorly focus on the management of risk whereas
FinTech firms focus on managing the overarching customers’

◈ Personalisation:
◈ In terms of improving user experience, banks are now toeing the
line of new-age FinTech companies. Traditionally, banks had
been laggards,a regulated institutions that supply credit, the
lifeblood of economic growth and have got sovereign insurance
for their liabilities of the deposits and have a very resilient
business model which focuses more on trust and security,
significant capitalisation and customer indifference.
◈ FinTech usually focuses on mobile functionality, big data,
accessibility, agility, cloud computing, contextuality,
personalisation and convenience. They accelerate and prefer a
change in the customer preference around mobiles platforms,
smartphones and social media.
◈ Communication Pattern:
◈ The core premise of FinTech firms has been ‘user experience’
and the implementation of good user experience. This is the
aspect where banks fell behind and are only integrating good UX
practices to ensure customers have a seamless interaction. Case
in point, 2018 went down as the year of chatbot launches by
major banks
◈ Whereas FinTech’s communication pattern is such that other
than this their focus is on innovations that promulgates faster
transactions, 24×7 permanent access, immediate consultation
and remote account opening which gives much more
significance to their communication with the customers.
◈ Potential Coverage:
◈ Market distribution of FinTechs is higher due to higher penetration of mobile phone
connectivity in comparison with the physical distribution of banks. For example, in
India, mobile penetration stands at 80 percent in comparison to the bank’s 35
percent distribution which gives FinTech an uncanny advantage over banks.
◈ Key Functioning:
◈ Banks are more process-oriented. The legacy systems and regulatory framework
they carry restricts their ability to quickly leverage new technologies and roll out
new products and services which can address the customer issues.
◈ Banks legacy infrastructure and disengaged workforce showcase an asymmetric
risk profile for innovation. Within legacy banks scores of assets accumulated over
time add little incremental value as a major portion of these assets drains on
productivity, innovation, corporate energy and profitability because of which banks
have a severe potential downside reputation and operations
◈ Whereas FinTech’s new-age data native companies are more customer-
oriented asset and have lean operating models are free of legacy system
issues and have better regulatory arbitrage. FinTechs have flatter
organisational structures with fewer barriers to change. This structure
encourages not only innovation but the ability to tear down and rebuild
its non-performing structures.
◈ This allows them to leverage new technologies like cloud and artificial
intelligence to offer a highly unique customer experience centred on
personalisation, speed, relevance, and seamless delivery. FinTech
streamlines complex financial processes, making it more accessible to
people. This is an area that is led by data-native companies such as
Google, Amazon and Paypal which have all rolled out niche products
targeted for millennial segment
◈ Technology Perspective:
◈ FinTech companies depend heavily on technologies like
automation, artificial intelligence, and machine learning
which is the reason for the faster rate of functioning.
◈ Traditional banks are still grappling with legacy
◈ Incorporating such technologies like these leads to lesser
mistakes, ensures the quality of service and provides any
quick service on a shorter notice
◈ Outlook
◈ Banks have dramatically evolved in the way it functions under the
influence of new age technologies such as analytics, AI and machine
learning .And FinTech startups too are fast picking up in the adoption of
technologies .
◈ Some of the banks are even acquiring FinTech startups to enhance their
services. Many financial institutions including Barclays, Citibank,
Goldman Sachs have accelerator programs for FinTechs whereas BNP
Paribas, HSBC, UBS and Deutsche Bank have invested into FinTech
firms which offer solutions across personal finance, wealth management,
lending, payments, settlement blockchain, data analytics and other
regulatory technology.
◈ India has already gained significant ground in the FinTech
ecosystem with a good supply of proficient and
inexpensive talent. Collaboration between ICICI Bank and
Paytm on digital credit account is a good example of how
banks have started partnering with FinTech firms at large.
With innovative ideas and cost reduction technology
brought in by FinTech companies, the traditional banking
environment and business is set to get disrupted. But
banks must understand the FinTech noise in order to
rebuild their business models according to the new
banking and financial environment.