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Integration between technology and knowledge

Banks and fintechs have been in competition for some time, as the fintech industry flourishes, banks increasingly fear losing out. However, the constant comparison between the two highlights that they have opposing strengths – both as important as the other, that could be utilised to benefit each party.  

Contrasting strengths of banks and fintechs

Firstly, banks are the ‘masters of risk’. That is, analysing, understanding and judging risk is core to their business operations – and has been for generations. They have both the extensive knowledge and skills, and a substantial track record in managing risk successfully – a significant advantage they hold over newer fintechs and challengers, especially in the popular lending space.

By contrast, fintechs, have the advantage of agility, personalisation and engaging digital experiences – with all their processes driven by digital foundations. By utilising new technologies and innovation, fintechs are able to offer speedy, seamless and customer centric services that many banks may struggle to match.

However, it’s not all positive for fintechs as they lack the knowledge and reputation built up by traditional banks over the years – as well as the trust that goes along with it. Trust is essential in an organisation as it influences, not only your own choice to stay loyal to an institution, but also has the potential to reflect in similar choices made by those around you, as recommendations from family and friends goes a long way when choosing a branch to affiliate with.

Collaboration and utilising fintechs

The opposing strengths of banks and fintechs has resulted in a knowledge gap between the two. Both have valuable insights, skills and consequent reputations to share with the other but they’re currently not using this relationship to the best of their abilities – by way of enhancing performance on both sides.

In order to build fruitful and productive relationships with fintechs, banks need to understand the knowledge gaps, appreciate their strengths in the market and understand what they need to hold on to. Digital transformation in the banking industry is not simply about ripping out the old and replacing it with shiny new technology; it is about actively building on the old. By collaborating with fintechs or setting up fintech like labels in the market, some banks are taking the advantage of the best of both worlds. 

The need for integration

If banks were to combine their extensive knowledge with modern technology that is available through modern third party players they would be able to create a highly competitive advantage over their peers of fintechs and challengers. Alternatively, if fintech knowledge or knowledge of banking are used in isolation, traditional financial institutions risk being left behind and give them the opportunity to move in to more profitable markets such as specialised lending.

Therefore, it’s essential for banks to recognise the differences between themselves and fintechs, looking at which parts of their processes they can update and which they can match – whilst maintaining their own competitive edge. 


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