Fri. Jul 19th, 2024
fintech and banks

According to the World Fintech Report 2020 put together by Capgemini and Efma, “Fintechs and challenger banks offer unique strengths and capabilities. Their cloud native design opened an evolutionary platform infrastructure and data driven mindset empowers their last mile delivery.”

So not that surprising that the customers are being drawn to “modern technology driven financial services”, especially when 48% of Gen Y and tech-savvy customers are frustrated by poor services of the traditional banks. So how can the banks that are pre-existing for years make sure that they do not go out of business in the coming generations?

To stay in the competition of the banking sector, Finstitutions must become:

  • Agile

  • Customer-centric

  • Inventive and Adaptive

Banks must strengthen their middle and back-end operations through designative collaborations with Fintechs (Financial technology). Most of the banks that we as citizens have direct access to ignore the improvisation in their middle and back-end operations. They heavily focus on customer facing operations (but not in qualitative sense) making their core shaky even for front-end operations.

fintech banks

By adopting a modernization in the middle and back-end operations banks will succeed in open X ecosystem which is a more open and more accessible platform where not only common people but industrialists and businessmen across the globe can collaborate to enhance customer experience.

This will also help banks to retain or even grow their market share successfully. The best way to achieve this is by allowing effective collaborations between Inventive banks and financial-tech companies or start-ups. This collaboration should be a built and structured on a very basic approach of effective customer service to be specific on the financial business and technology end.

What is Open X Ecosystem?

A Banking environment with seamless data-sharing, integrated market place, easy access to comprehensive collaborations, improved customer experience, and advanced product innovation.  With deeper specialisation Open X is beyond Open Banking system.

We, our children and our children’s children, or Gen Y millennials and the Gen Z teenagers, are reinventing finance with code.

What world of finance do they want, and how will the bankers of old, who are older, react?

If you pay close attention, you’ll see Fintech as being the marriage of the parent-child relationship. Financial services are the parent that wants resilience, stability and security and technology is the child that wants to challenge everything and argue everything and change the future and design a whole new world and that’s why a lot of Fintech start-ups have as their cultural values doing good for the society with technology doing good for the planet with technology because they are Gen Y and Gen X. With great power comes great responsibility and that’s what banks have – great power and they have been responsible for many of it.

bank of england
The system of Central Banking & Modern Credit: Alexander Hamilton, New York City

Global banks are supporting Fintechs lab space with the hopes of tapping into local cloud analytics cyber-security and regulatory invasions.

Fintechs unlikely to replace Banks completely?

It is believed that the hype is too strong for fintech companies. But banks have been there for 600 years and there’s been a very special reason as to why banking exists to provide very specialised services and it is not totally clear that Fintechs, digital lenders can cover the full spectrum of lending.

So it is believed that for some loans in particularly extremely safe loans that the peer-to-peer lending or market place funding would be very efficient.

But as soon as credit risk start to be larger, then balance sheets funding but banks would remain always important. The disruption of bank hype has been going on for more than 30 years now. The banking industry will just adapt to the new technology and will emerge more successful as per many Banking and Finance experts.

How did the current Banking system beome what it is today?

Let’s go to 2008, the financial crisis triggered plunging banks back to 5 years of time of work. The survival of banks depended heavily on recovery of capital levels.

Now fast forwarding to 2014, banking emerged and intended to recover its usual profitable transactions with captive and customers who were mortgaged and who had little to choose from other than traditional banking.

But what is happened to customers in those 5 year (2008-2013)?

banks of india

A very large number of customers has chosen to use their smart phone, in the given time. They can use it at any time and any place. They feel comfortable about it. Now they can take smarter buying decisions by comparing online.

They can easily choose one or other option by a simple click. Consumers feel that when they perform transactions through a digital channel. The balance of power is shifted and now they have control. Consumption of financial servers is not an adapted to this scenario.

Consumers are reaching the first level of the hierarchy of human needs i.e. self-esteem in Maslow’s pyramid. Permanent connectivity has become a factor and a point of return towards digital banking.

What is happened to traditional banking in those 5 years?

Traditional banks have managed to survive but now faces many problems. The customers behaviours has changed. Shadow banking has emerged and new players have arrived in the scene. The image of bank has taken severe battering. While the new players have many supporters.

Users have no problem with sharing their details with the new players because they feel their data are used for their ultimate benefit. Also they recommend these new players to their friends. Have you ever recommended your friend to go to a Bank or just try logging onto the website?

In the movie “Zootopia” banks were run by Sloths , an indirect jab at tradtional banks being slow in service.

Meanwhile traditional banks are being slow to respond to this situation because of banking regulations, inflexible, banks have cut their IT budgets, banks have organisational structures, banks are not used to dialoguing with customers and the gap between them in terms of communication is growing wider and wider.

Faced with this situation banks want to go back to their pre-2008 status and stress the need for face to face interaction in branches. Customers steer clear of the traditional banking system and begin to look for other options. It’s against these backgrounds that we see new fintech start-ups emerge threatening the bank’s survival.

Banking is destined to become a Utility:

Banking can become a utility if it doesn’t take steps to redress the situation. How is the customer’s behaviour going to evolve in the coming years?

Customer behaviour is changing and will continue to change retail banking’s through the four evolutionary stages.

First phase: Internet banking

Internet becomes the priority access point to the banks and the branch becomes less important.

mobile banking Second phase: Mass adoption of Mobile devices.

Through bank websites and apps customers can meet all their banking needs, except for cash transactions.

Third phase: Mobile wallet

This involves replacing the credit card with the cell phones and the gradual disappearance of cash and branches.

If only 50% of cash transactions were replaced by electronic payments. The current model of branches and ATM becomes economically unsustainable.

Telephones are used to channel day to day banking data and bank account becomes a commodity, which no longer requires a full banking system.

Fourth phase: Everyone is a bank

Because cash disappears banks lose their dominant position in retail banking. The usefulness of banking products is linked to the process of buying the product in process at the right place and right time. And then you pass the opportunity of becoming a bank.

For example, business schools, furniture store, travel blogging website which directly finance their customers.

If banks lose daily contact with customers at the expense of other operators such as Telco’s or internet giants even the modern day neo-banks. Then they will be relegated to the position of utility.

The new role of banking is more of a question of understanding the whole of its products and how it affects the customers’ life. Making these products available at the right place, right time and right way is equally important.

Banking has the means to change its destiny:

save banks

Although everyday banks have less n less room for manoeuvre, banking is able to take a step closer to its customers by adopting the new method already used by new fintech players. Focusing on the user-experience (UX) via bid data and the use of social media.

Banks current problems with their customers arise due to the poor user experience they provide in an isolated way for each one of their channels. Most customers use bank websites for core banking services, they use their cell phones to carry out simple actions as it is still an emerging channel, their computers for queries and simple transactions from home.

Customers call centres when they can’t find something online. ATMs are availed for withdrawing cash and branches as a residual channel when they can’t do something through other above mentioned channels or they need advice.

Branches provide psychological support for elderly customers but not for the rest of customers. The majority has less time and prefer the internet. Branches have to avoid disappearance by more profitable branches focused on advisory services and not just on transactions.

In the long term only a small number of flagship-type centralised branches will remain. ATMs will continue to exist as long as physical money continues to circulate but cash will probably be phased out at some point over the next 10-20 years.

In the near future ATMs will probably be integrated with some phones until they end up fading out of the picture becoming obsolete. However, thanks to technology, consumers are starting to use new practices to purchases or hire a service.

They have access to much more information allowing them to compare product easily to receive customised offers while they are buying and lastly they quickly tell other people about their user experience. Banking needs to advice their customers at the initial stage. Enrich their offerings and help them recommend. But as of today banks do none of these.


Big data is becoming a competitive advantage in all sectors. In addition to this storage and computing have also fallen significantly turning bug data into smart data as a differential element.

Banks have more valuable details about their customers than any other company in any other sector and one way to stand in competition with these new players is monetising this information. Banks can use their data to their advantage with two objectives:

  • To improve their customer segmentation and Be more operational to optimise income services
  • To propose products from other sectors to their customers.

Meanwhile social media now have a massive presence in 2020, and customers now hope to use it in finding an ideal bank. This is a best opportunity to bridge the gap between the bank and the customers because it allows the bank to have a better understanding of customer needs to provide them with better service and assess their risk more easily.

They can have used to some additional low cost distribution channels. They provide a higher level of security and communications, which leads to better service for customers.


However, banks have to overcome a number of challenges if they have to take advantage of social media. It is a very large and dynamic rea and one which is still confusing. It is essential to properly manage regulatory compliance in protecting customer’s data.

It is important to communicate in a sensible and coherent way something which proves difficult with high levels of participations we find on these network. The best social banking does not work unless there is a change in mentality of tomorrow’s generation about the way banks operate today .


Personal Note: We express our utmost gratitude to all the Bankers of India who have been working to keep our economy running at the risk of their own and their family’s life during Covid-19 pandemic 2020. These bank employees are also regraded as the “Corona Warriors” whose service will forever be an inspiration to generations to come. We salute your work spirit!

By Kritika Krishnakumar

Kritika is a News Reporter and Creative Content Writer at The Indian Wire. An ambitious Student with curious nature towards learning. Also, an inspiring Teacher in the field of Accountancy, Economics, Mathematics and Commerce.

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