The rise of banking competitors has catalyzed significant changes in the whole financial system. Banks are becoming less strict and there has been a distinct process of bank humanization over the last few years as Fintechs have become more prevalent.
The rise of the Fintechs has arguably been exacerbated by the COVID-19 pandemic and many of its most popular shining lights have been quick to adapt and grow as a result. According to Richard Lynch, the Managing Director at prepaid debit card providers Suits Me: “We are committed to providing a suitable banking solution for everyone. So, I’m delighted to say that our latest achievements are a great stepping stone to further extend our reach to financially excluded individuals, who are eager to take their next step on the banking ladder.”
In a nutshell, that statement sums up why Fintechs have changed the game so rapidly. It’s the excluded communities (the so-called “unbanked”) that have most obviously benefited from the rise of the Fintechs. But they are certainly not the only ones.
No longer the only game in town
Banks are not the only go-to option for the general public in regard to the finances that they once were. Now, they have a choice. Of course, in many developing countries, there was always a problem in some situations where brick and mortar stores were few and far between and internet infrastructure (not to mention adoption) was low.
But we live in a world now where the internet is readily available even in the most deprived regions of the world and now that they don’t technically need a traditional bank account anymore, the possibilities have been massively opened up for them.
It’s not only those living in developing nations that have struggled traditionally when it comes to bank accounts either. A credit score is a big issue for many and how Fintech has come up with solutions for this by building alternative credit scoring systems.
Add to that the fact that these younger and more nimble banking alternatives charge fewer fees (due to being less beholden to regulation and having fewer overheads) and are using better technology and it’s not difficult to see why more people are jumping ship than ever before. But what have the banks been doing to respond?
Adapting to a new era
For the legacy banks, it’s been a simple question of adaptation. The advent of open banking in the UK has been a major help, as it’s allowed major banks to offer more flexible services and let existing customers consolidate their finances into one place.
Generally speaking, however, where the banks really need to up their game is in their customer service. Banks need to learn from their younger competitors and take stock. Otherwise, they run the risk of ending up like Blockbuster Video.