The world of finance is in a state of flux. It stands securely upon a reliable foundation of traditional banking practices, while also enjoying the ever-evolving innovations brought about by technology. As coronavirus hastens the growing trend towards fintech, generational divides in financial perspectives and practices have never been clearer. 

Unfortunately, major banking institutions have failed to keep up with the rapid development seen in the fintech industry. Customers are frustrated that their banks don’t offer the same convenient functions that they can get from easily downloadable, free applications such as Venmo, PayPal, or Robinhood. Although some banks have rushed to create similar apps, it will always be hard for Wall Street to compete with Silicon Valley in terms of tech design and function. 

Instead of competing with fintech companies, financial institutions will be rewarded if they embrace a culture of collaboration. In this article, we’ll discuss how partnerships between major banks and successful fintech apps are mutually beneficial business relationships that can allow both sides to flourish. We’ll also discuss the growing divide between online transactions and brick-and-mortar banking practices, and why both have their benefits and drawbacks. 

The Case For Collaboration

The coronavirus global health crisis and subsequent lockdowns expedited worldwide digital transformation. The past year highlighted the importance of WiFi connectivity and smartphones as necessities rather than luxury items. It’s clear that fintech is here to stay, but it seems that many traditional financial institutions are unsure of how to react. 

According to the World Fintech Report 2020 compiled by Capgemini, structured collaboration is essential between banks and the fintech sector. By investing in partnerships with fintech companies, time-honored financial institutions can leverage their solid financial standing to gain access to cutting edge fintech developments. 

Partnering with promising startups early means financial institutions can encourage apps to be built in a way that integrates with their own app and enhances customer experience. 

Fire Your Broker: The Rise Of Online Trading Apps 

The biggest fintech market disruptor is no doubt Robinhood, an app that allows anyone with a smartphone to easily invest in stocks with no minimum balance. The app has been lauded for democratizing stock trading, which was once a realm of only the rich and well-connected. 

Quality customer service is a benefit that traditional banking institutions can offer that fintech apps usually can’t. While people are visiting their branch locations less and less, most feel more comfortable holding their money in a traditional bank or credit union where they can speak to a human if they ever need help. 

It’s interesting to consider that, in spite of this new era of online stock trading, many high-end investors prefer sticking with their traditional stock brokerage because they value the relationship that they have built with them over the years. After all, trust and duty of care are important things to consider when you are trusting someone with a large sum of money. 

While new stock trading apps such as Robo Traders utilizes artificial intelligence for an even less humanistic experience, there will always be consumers who prefer human interaction and reassurance when it comes to investing their money. 

Venmo, Cash App, Or Wire Transfer?

Most retailers and e-commerce platforms allow customers to pay in a variety of ways, usually including PayPal or Klarna as an option when checking out. Banks should adopt this mindset too, and seek ways in which they can form partnerships with popular money transferring apps that will enable them to promote their brand. 

For example, one of the drawbacks to apps like Venmo is that received cash isn’t automatically sent to a bank account, meaning an unaware user might have funds sitting in his or her account that can’t be accessed until being transferred. This is one area in which a partnership with a major banking institution can improve customer experience and retention for both the fintech app and the bank.

The Growth Of Bitcoin

Conclusion

A customer-centric view is key for financial institutions of today, and most users are calling loudly for convenient online solutions. If banks can commit to a tech-forward, collaborative approach to finance while also retaining their service-centered culture, it’s a win for everyone.