The Dominance of Banks Undermined by Fintech Innovators

With the emergence of Fintechs and the spread of disruptive technologies they introduce to the market, the dominance of banks is starting to erode. There are still some that refuse to acknowledge the obvious change in the way financial services work. As they remain skeptical, FinTech disruptors keep coming up with new products and services, bringing customer experience to a new level, which gives them a significant competitive advantage.

After all, numbers speak louder than words: according to a survey by the University of Chicago, only 41% of Americans has substantial trust in banks, while 27% expresses discontent about the economy in general. People are questioning the good intentions and the transparency of Wall Street institutions. Technological advancements, such as decentralized finance (DeFi), tokenization of assets, artificial intelligence, regulation technology (RegTech) and cryptocurrencies, have introduced customers with new solutions for storing money, executing transactions and protecting personal data and privacy.

Below are a few examples of conventional business being done in a new manner.

Peer-To-Peer (P2P) Lending

We live in times when clients give great importance to the personalization of goods and services. They are looking for companies that have the ability to predict modern needs and perfectly know all the details about their customer persona. P2P lending firms have already pursued the opportunities this trend has opened and have integrated personalization into their strategy. Borrowers and creditors can now directly match on a shared platform, so that both find the best interest rates and deal terms out there.

P2P lending is especially popular among Millennials and Gen Z, as they are mainly looking for lower borrowing costs than the ones offered by banks and a seamless digital experience.

Income-Earning Tokens

Bitcoin fans see cryptocurrencies as a promising instrument for sending and receiving transfers worldwide in seconds under the conditions of ensured security. Yet, the overwhelming hype around the technology has been greatly affected by a major fall of Bitcoin prices. High volatility of crypto assets makes it difficult to fully integrate them into global economies and begin using them for day-to-day transactions. Strict regulatory frameworks and the skeptical hostility do not help the issue either.

However, Fintech disruptors have introduced income-earning tokens that bring interest or dividends to their owners. Cryptocurrency exchange platforms, such as Poloniex and Binance, have already implemented programs that allow users to earn rewards. The compensation system contributes to the overall growth and development of the ecosystem, as well as the promotion of blockchain technology.

Outperforming Banks

With the popularization of ethical initiatives in the financial industry, many bank customers began to express frustration about practices like overdraft fees, excessive ATM charges and so on. Such sentiment is beneficial for Fintech startups that focus on offering high quality services for lower prices. With their outstanding feature range and innovative technologies adoption, these companies have full potential to outperform banks.

For instance, blockchain-based payment processors allow customers to transact 24/7, without limitations that can be posed by business hours. Besides, such systems usually process transactions faster, provide higher security, and lower the costs of service providers by removing the need for intermediaries.

Improved performance, immediate response to competitive threats and ability to capture new opportunities as soon as they appear is what gives Fintechs true advantage on the market, suggesting they have all it takes to decrease the dominance of banks in the industry.