By Ashish Katkar . August 21, 2021 . Blogs
Ever since the beginning of the global COVID-19 pandemic, banks, and financial institutions have borne the brunt of the ensuing economic disruption. The “traditional” banking model is facing unprecedented challenges and risks, including a few crucial ones like:
As we return to a post-pandemic normal, a stronger banking sector will be needed to stage an economic recovery. At the same time, banks will need to focus on fulfilling customer needs while driving efficiency and building resilience.
As opposed to this, the “global Fintech industry has largely remained resilient despite COVID-19” as pointed out by Bryan Zhang of the Cambridge Centre for Alternative Finance. A recent World Bank assessment shows that the Fintech sector is booming, with an increase in transaction volumes by 11% during the pandemic. The overall Fintech market is expected to reach $325.3 billion in 2030 because of the increased use of digital payments, the exponential growth of e-commerce, and the long-term impact of the pandemic.
Fintech innovations can make financial services accessible to everyone at a reduced cost. Their potential to close gaps in the delivery of financial services to households and firms worldwide is acting as a catalyst to forge collaboration between financial institutions (FIs) and Fintech companies.
How can this help? Let us discuss that next.
As we return to a post-pandemic normal, a stronger banking sector will be needed to stage an economic recovery. At the same time, banks will need to focus on fulfilling customer needs while driving efficiency and building resilience.
As opposed to this, the “global Fintech industry has largely remained resilient despite COVID-19” as pointed out by Bryan Zhang of the Cambridge Centre for Alternative Finance. A recent World Bank assessment shows that the Fintech sector is booming, with an increase in transaction volumes by 11% during the pandemic. The overall Fintech market is expected to reach $325.3 billion in 2030 because of the increased use of digital payments, the exponential growth of e-commerce, and the long-term impact of the pandemic.
Fintech innovations can make financial services accessible to everyone at a reduced cost. Their potential to close gaps in the delivery of financial services to households and firms worldwide is acting as a catalyst to forge collaboration between financial institutions (FIs) and Fintech companies.
A survey conducted in April 2020 found that just 14% of consumers turned to their bank for financial advice following a life event that significantly affected their finances. As a result, there is a renewed focus on technology solutions in the banking sector.
Partnerships between traditional financial institutions and Fintech companies can yield immediate advantages to both sides. Banks can gain business agility and innovation from advanced technology, while Fintech companies benefit from decades of customer loyalty, the scale of operation, and an established banking network.
Here are a few other reasons why banks are considering collaborating with Fintech companies in a post-COVID world.
Matthew Blake of the World Economic Forum summarizes it perfectly as, “FinTechs have proven resilient and adaptable: contributing to pandemic relief efforts, adjusting operations and offerings to serve vulnerable market segments, like micro, small and medium-sized businesses, while posting year-over-year growth across most regions.“
With banks moving to digitization, here are a few examples of successful bank-fintech partnerships that we should know about:
These financial institutions are leading the way in encouraging partnerships with the Fintech sector. The benefits of this collaboration go beyond increased revenues and managing credit risks. Next, let us discuss a few benefits of this collaboration.
Talking of benefits, here are just a few of them:
In a survey, 43% of consumers told EY that the way they bank has changed due to COVID-19. If FIs want to retain their customers, they need to innovate and introduce new products and services. From opening a new account to money transfer and account closure, Fintech companies can digitize their daily operations by adopting the latest technologies. For example, AI-powered chatbots can improve the customer experience manifold with its offerings. Customers can schedule appointments online, track their loan applications, and get instant help.
These days, customers do not simply want to open a bank account but expect more value propositions and investment opportunities. Fintech can help banks modernize their services and reach more customers.
A classic example of this is the RBL Bank, which revealed that it acquired 30% of its 2.8 million customers in India through tie-ups with startups. Similarly, Yes Bank has gained a massive customer base by acquiring 20% of its customers through digital channels.
With the constant pressure to digitize and innovate their services, Fintechs can help banks stay competitive by developing and managing the required software products. Further, they can improve the overall operational efficiency of their IT infrastructure through digital transformation. Additionally, Fintechs can help banks reduce the transaction turnaround time while achieving complete control over the entire banking process.
Legacy system-based infrastructure isn’t providing the customers what they need, including faster transactions, freedom to transact from any device, or innovative banking products or services. Further, the pandemic has made financial institutions realize that they need to partner with Fintech companies to remain relevant to their customers and meet their expectations.
On its part, Verinite has years of experience servicing the retail banking industry and fintechs helping them in their digital transformation journey. Contact us with your queries now.