If banks and fintech companies are pitted against each other, traditional banks will win the number game, but fintech is arguably the future of banking. Can these two forces coexist?
People’s reliance on mobile and online banking has grown sharply since the pandemic, a shift discussed in a report by McKinsey. Many people now prefer to bank remotely, and traditional banks and financial institutions have recognized that financial technology is challenging their role as the primary channels of credit and investment. In recent years, banks have taken bold steps to integrate technology into their processes, making branchless banking and agentless transactions more accessible.
Is there some kind of tension between fintech startups and banks? The competition that disruptive fintech startups have introduced has done a lot of good for consumers, since it has pushed banks to improve their services. In many areas, the competition is now as much between fintech startups themselves as between fintech and traditional financial institutions.
What drives the growth of Fintech?
Speed comes to mind right away. Fintech has removed the geographic hurdle between consumers and financial services. Many transactions, and often even identity checks (KYC), can now be completed without any physical step. Where an in-person interaction is still needed, it is often the fintech provider’s representative who travels to meet the customer. This is the kind of convenience modern consumers are getting used to, and they are unlikely to settle for less.
Speed aside, what drives fintech is its focus on user experience. The applications keep getting better, and many offer budgeting tools, wealth management features and financial guidance right at your fingertips.
Thanks to fintech, you can complete a purchase on an eCommerce channel like Amazon in seconds. No wonder consumers are reluctant to go back to slower transactions through traditional channels, and McKinsey has examined how many clients now want a largely digital banking experience in another report by McKinsey.
Also Read – 5 Robotic Process Automation Tools to Streamline Your Business in 2026
Key use cases of Fintech
Online payment gateway: The infrastructure that allows merchants to accept payment for their products and services through the internet securely.
Mobile payment app: A mobile based application that allows sellers to accept electronically transferred payments without investing in hardware.
Crypto exchanges: Cryptocurrency is not widely accepted as everyday legal tender, but buying, selling and storing it depends on fintech platforms.
Buy now, pay later (BNPL): Services that let shoppers split a purchase into a few installments at checkout. They make purchases more affordable in the short term, but missed payments can lead to fees and debt.
Robo-advisors: Automated investing platforms that build and rebalance a portfolio based on your goals and risk tolerance, usually at a lower cost than a traditional advisor.
Digital lending: Online lenders that use automated checks to process loan applications quickly, often for personal loans or small business credit.
Regtech: Software that helps banks and fintech companies meet regulatory requirements, for example by automating identity verification, fraud monitoring and compliance reporting.
Embedded finance and banking APIs: Payments, accounts or loans offered inside non-financial apps, often by connecting a bank’s systems to a fintech partner through APIs. This is one of the clearest examples of banks and fintech companies working together rather than competing.
How are banks reacting to the emergence of Fintech
Banks and financial technology are parts of the same industry. Banks have long used technology to strengthen their back-end processes. Now that fintech startups are using technology to improve the customer experience, banks are reacting in two main ways: A) acquiring or partnering with fintech startups, and B) adopting tech-driven practices themselves.
Finance has never been as easy and accessible for consumers as it is now, thanks in large part to the fintech industry. Whether banks lose ground or fintech companies and banks grow closer through partnerships, the two are increasingly complementary. For more on this relationship, read fintech vs. financial services. This article is general information, not financial advice.
