Rather than competing, fintechs and traditional banks might possibly create more value by working together. While fintech companies continue to drive innovation in the financial services industry, many enterprise-startup relationships are hampered by stringent
laws, data privacy issues, and security concerns. As a result, many business banking institutions are collaborating with fintech companies to further their digital projects. Big banks are being forced to transition from legacy institutions to innovation accelerators
as a result of the current wave of innovation. While fintech firms will not be able to capture the market on their own, banks must choose between matching their own innovation or collaborating with fintech firms to remain competitive. If clients grow to expect
the same speed and innovation from banks as they do from fintech startups, incumbent institutions will have to either find out how to produce new products faster or partner with firms that can.
Fintech as the personification of innovation
The rise of fintech has forced many finance leaders to reimagine their core businesses around data and digital platforms, harnessing data, partnerships, new models of consumption, and an open architecture to promote efficiencies and security. Open-source
software, serverless architecture, and Software-as-a-Service (SaaS) have become requisites for both tech players and legacy financial institutions that are starting new fintech businesses. These core technologies and trends are becoming more and more intertwined
and integrated, providing massive momentum to fintech innovation and the financial sector. Technological advancements and innovations are a key driver for fintechs growth, and they will continue to fuel disruptive business models across the financial services
sector. Many traditional financial institutions have also been compelled to think big as fintech businesses boast about their cutting-edge digital capabilities and their digital delivery models have gained traction amid bigger trends across the financial industry.
Fintech is the personification of innovation, which is why many traditional financial institutions are struggling to keep up with the new trends that are now disrupting the industry. Because banks are pursuing online services such as insurance and investing
at a breakneck pace, falling behind in the technology field will not cut it in the financial sector. Although fintech businesses' agility and customer-centric approach provide more agile solutions and a better user experience, legacy financial services institutions
benefit from their size and expertise, which fosters confidence. Fintech expertise is increasingly being used by financial institutions to optimize and automate procedures, establish data silos, and provide 360-degree perspectives of their clients.
Today, the range of fintech innovations has expanded from areas like payments, lending, and investing, to new business models like insurancetech, regulatorytech, data-driven marketing, and cryptocurrencies, blockchain technologies (smart contracts, open
banking), and cybersecurity. Despite a rich history of innovation within financial services, such as credit cards and Internet banking, fintech is typically associated with newly emerging startups. The financial services industry is undergoing rapid transformation
on a mass scale, in no small part because of technology: cloud computing, big data, robotics and artificial intelligence, the redefined conception of money, virtual and open banking, and fintech. Product management, growth hacking, software development, cyber
security, customer experience, stakeholder engagement, and data analytics stand out as skills that will be sought after by not just fintech industries, but also by any consumer Internet company.
Digital disruption in financial services requires that certain business architects broaden their scope of expertise
Despite the obvious benefits a corporate-fintech start-up partnership could provide customers, the integration of the technology within the processes of a financial services company, as well as broader access to data, creates greater compliance, security,
and privacy risks. No-code, or lower-code, development platforms could potentially free vital R&D resources to work on more projects simultaneously, giving legacy financial institutions the edge needed to compete with fintech startups, even while they implement
enterprise-wide digital transformation projects. As many financial institutions are including IT-enabled operations into their list of services alongside fiat cash, fintech solutions enabling that capability are certain to see a surge of adoption from tech-savvy
consumers. Open banking allows third parties to develop services and products around the offerings of a financial institution, using an open API. This would unlock the previously untapped potential of ecosystem-based finance, where banks, insurers, and other
financial services firms work with non-financial players to foster a seamless customer experience in areas beyond banks traditional purview. Banks will also work extensively with non-bank partners to deliver novel value propositions integrated across different
customer journeys, technological platforms, and data sets. Finance integration has been a growing trend in the last year, and is poised to continue growing further, with many banks looking to be providers to non-banks and non-financial institutions looking
to provide a customer experience or a service proposition involving financial services as part of the larger offer.
As demand for quick financial and trade transactions of all types has grown rapidly, banks and others involved have been robustly adopting fintech products in their normal practices. Similarly, services industries like airlines, food, and beverages, and
others, will unavoidably either adopt payments solutions from smaller fintech firms, or evolve services industries like airlines themselves. The primary purpose of fintechs, as well as their push for innovation, is to use technology to serve customers financial
needs and provide experiences they cannot get elsewhere.