For a long time, customers have tolerated poor technology in traditional banks. However, with fintech on the rise, banks struggle to keep up and have been forced to offer the consumers the innovation they crave. Currently, many banks are using FinTech in a bid to become digitally knowledgeable. Banks and FinTech are successful because banks provide a ready-made infrastructure with a strong foundation from the industry experts. FinTech firms also introduce new use cases of agility and technology. This article discusses the significant differences between FinTech companies and traditional banks.
Personalization and technology
Banks are embracing the line of new-age fintech companies. Traditionally, banks focus more on security and trust, the existence of economic growth, and got insurance sovereignty for their liabilities for their deposits. Fintech focuses on big data, agility, accessibility, mobile functionality, cloud computing, personalization, contextuality, and convenience. They hasten and provide changes to the customers around mobile platforms, social media, and smartphones. Fintech companies use machine learning, automation, and artificial intelligence to function faster and minimize mistakes in their operations while banks still struggle with legacy infrastructure.
Purpose
Purpose is the significant difference between traditional banks and fintech firms. Fintech products are developed through gap identification in the marketplace while legacy institutions such as banks focus on the wider audience. Legacy banks majorly cater to risk management. On the other hand, fintech firms focus on controlling the overarching experience of their customers. The regulatory framework and legacy systems that banks employ restrict their ability to grip new technologies early enough. They thus cannot introduce products or services that address their customer issues or needs at the same speed as fintech companies. In general, banks are more process-oriented as compared to fintech companies.
Regulations
All financial institutions are regulated to make them safe for their customers. Banks are stricter, while fintech companies are flexible and lenient. So many fintech startups have appeared while these companies do not have a specific regulator. They can make changes to their business without strict guidelines. Some companies opt to be more regulated for their customers to feel safer. Central or national banks regulate traditional banks. The regulating bodies require that banks completely adhere to the legal requirements, guidelines, and restrictions to safeguard their customers’ money. These regulations ensure transparency between the customers and the financial institutions.