Initially, banks and other financial institutions had perceived fintech companies as their disruptive competitors. However, as time went by, the narrative began to change.
Research from Carsurance infographic shows that financial institutions have lately taken a keen interest on the fintech sector. The infographic goes ahead to reveal that by 2017, at least 40% of banks in the US, Germany, and the UK had partnered with fintech companies.
The result of legacy players accepting the disruptive force of fintech has been quite beneficial to both the involved sectors and the consumers. Thanks to the partnership, consumers can now access improved financial services.
There’s no doubt that fintech startups are known for their speed and agility. But as true as that is, compared to other players, banks and financial institutions have been slower to change their fintech technology.
Other types of businesses have been keen on adopting fintech innovations such as blockchain and peer-to-peer payments in their operations.
Subsequently, a good number of startups have simplified conventional banking services. For instance, one can now easily manage her investment portfolio using a mobile application such as Acorns.
Other players such as PayPal have also simplified money transfer services, payments, and receiving funds globally.
Of course, most of these services have been made possible through the partnerships between fintech and financial companies. But for fintech companies to scale up even further, they need to increase partnerships with financial institutions, granting them access to the banks’ capital and data muscles.
Globally, banks are heavily investing in fintech startups to help them take off through buyouts, strategic partnerships, and mergers.
A few examples include acquisitions such as the one made by PayPal when it acquired TIO Network for $233 million. Another one is Mastercard which acquired Vocalink for $920 million. The list goes on and can be checked out in the infographic below.
In conclusion, the financial space is one of the oldest industries in the world. But as time passes by, both banks and fintech companies realize how essential it is to work together to improve their services while remaining competitive.
To do that, both sectors need to continue working closely to adapt to the ever-changing needs of the consumers and create opportunities where none existed.