Steve Lemon, Co-founder & Vice President, Currencycloud
The payments industry has seen huge innovation over the last five years, and consumers are reaping the benefits. Unfortunately, the benefits to the business world have been slower to materialise. However, banks that traditionally viewed fintechs as the “enemy” are now considered valued partners, and that is good news for developing businesses.
The payments industry has seen huge innovation over the last five years, and consumers are reaping the benefits. Unfortunately, the benefits to the business world have been slower to materialise. However, banks that traditionally viewed fintechs as the “enemy” are now considered valued partners, and that is good news for developing businesses.
Debit cards aimed at travellers, the growth of money transfer services, mobile-only challenger banks, big tech racing to be a payment method of choice, and the ubiquity of digital wallets in Asia are just some of the huge changes consumers have seen. And it is only a matter of time before such innovation reaches businesses.
The IT systems on which the traditional banks are built are in some cases 50 years old, and no longer fit for purpose for today’s demanding customer. Emerging technology and an entrepreneurial spirit have seen the rise of fintechs, creating services that benefit businesses and compete for banks’ customers on much slicker IT stacks.
At the same time regulators are attempting to increase competition by forcing banks to share core customer information to deliver the services that were previously monopolised by banks. For example, Currencycloud, a company disrupting cross-border money flows, enables businesses to avoid some of the charges associated with international payments while delivering speed and transparency that traditional banks can’t offer.
And while technology and regulation have brought massive change to the industry, perhaps the single biggest change is the customer.
Millennials and Generation Z are the core of the future workforce. They are digital natives for whom living online, on the move and where almost everything can be accomplished with a finger swipe on a mobile, is entirely natural.
So when a neo-bank such as Starling offers them a whole new way to bank, or when Apple lets them pay with their watch, or Revolut offers savings on holiday money, they’re enthusiastic adopters. When you see the ubiquity of digital wallets such as Alipay and WeChat in Asia, you can see a future where the traditional banks are no longer the core of the financial system.
When new services make life simpler, easier, faster or cheaper, and you’re comfortable with that environment, why stick with old, traditional, opaque and costly alternatives? As younger generations’ responsibilities grow in business, they will take a similar approach to business banking that they do to personal banking. They will move for a better service, and traditional banks must adapt.
The quickest route for banks to do this is through partnerships with fintechs. The cost of building new core-banking technology is prohibitive, but partnering with fintechs is not. We are seeing more and more banks move in this direction. It is their lifeline to keeping their customers.
And the big winners? The customers themselves.
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