The Synergy of Bank and Fintech is a Win-Win
Business, banking, and financial organizations in the USA and Europe are very closely related to Fintech. This is no longer just a connection, but a symbiosis of technology, finance, and commerce. According to the research by IndustryARC’s market analyst, the Fintech market volume exceeded $150 billion last year and continues to grow.
In today’s article we’ve made the research on such related questions:
- What are the main directions for the development of financial technologies in 2021?
- Fintech integration: why do the bank and business need it?
- What do the digital ecosystems mean for the bank, Fintech, and the customer?
- How to understand in which direction to develop your digital ecosystem and how to position it?
The main directions for the development of Fintech in 2021
The amount of data generated by the financial industry – credit card transactions, ATM withdrawals, credit ratings – is staggering. Banking organizations are increasingly using data analysis in order to better understand the needs of customers, predict them and prepare services that are attractive to a wide range of consumers.
Leveraging this data to make business decisions and efficiently process it to gather actionable insights is critical to staying competitive now and in the coming future.
According to the Cybersecurity Ventures, the global cybercrime costs are expected to grow by 15 percent per year over the next five years, reaching $10.5 trillion USD annually by 2025. Thus, the market for information security technologies, ready-made solutions that can be built into the own infrastructure, is actively developing.
Technologies of predictive analytics, AI, and machine learning are widely being introduced. The average cybersecurity expert cannot analyze every transaction in one’s organization, but the machine does.
Identification systems can protect clients of financial, insurance, and other organizations. And this market is also actively developing. According to Global Market Insights Biometrics Market size may exceed $50 billion by 2024, that is to grow at over 22% CAGR since 2017.
Fintech innovators need the support of established banks, just as these large organizations need new startup ideas. Through synergy, both banks and Fintech companies can create solutions to speed up financial inclusion and ensure its sustainability, constantly providing alternatives to improve people’s well-being.
In this context, we further observe the bank and Fintech collaborations, what the circumstances and directions of their partnerships are.
Building ecosystem leveraging Fintech integration
With the entry of virtual banks and global IT corporations into the digital financial services market, competition is intensifying in the industry. Existing banks have to look for new ways to quickly attract and retain customers. Building just digital banking platforms is no longer enough.
Traditional banks need to integrate new offers into the services they offer, which will be immediately available to the client and at the same time will not damage the bank’s brand or carry regulatory risks. It is for this reason that one of the main trends in the financial market today is the development of ecosystems that unite banks, Fintech companies, marketplaces, and other digital platforms into a single environment with a bunch of services available in a few clicks.
The financial ecosystem is a logical continuation of solving all issues online, including using mobile applications, chatbots, online assistants, etc. In order to create an ecosystem, a bank, first, needs a very strong and adapted technological solution. In other words, it is necessary for the banks to build a strategy in close connection with the strategy for the implementation of IT technologies.
Since from a technical point of view, an ecosystem is a complex of various interconnected IT solutions, web and mobile applications, CRM, it is important to have a single user interface standard that would provide the ability to combine different systems in terms of design and interaction experience. In this context, the Fintech startup is the key. Here the concept of value for the client comes first. Due to Fintech solutions, a user-friendly payment service, high-speed communication services, a flexible technological platform, and a functional marketplace are the points that will bring value to the client today.
What are the benefits for banks in the digital ecosystem?
The development of their own ecosystems allows banks to successfully exist within the framework of the intensifying competition in the banking services market. In order to be ahead of other banks, it is necessary to provide customers with the best new offers.
Within the digital ecosystem, the bank does not just sell its product separately but is built into a certain chain of relationships between other economic counterparties (supplier-buyer). At the same time, the bank regularly serves these flows of goods through various instruments, for example, bank guarantees or payments, or provides some kind of transactional services, thereby being part of this system. The bank acts as a service operator and helps this system to function.
Another positive moment for the bank is that it does not need to look for new clients every time since it is very costly and, in general, affects the profitability of the organization. The bank, being built into the technological platform, constantly generates a certain business and a client flow with numerous operations, etc.
To summarize, for a bank, creating an ecosystem with Fintech startups and other industry-specific businesses is a great step forward. On the one hand, this is a bringing in a returns marketing solution. On the other hand, the bank solves a matter of technology (internal processes’ work, security, etc).
How to understand in which direction to develop your digital ecosystem and how to position it?
To answer the mentioned question, the bank needs to do two things. The first is to identify its strengths in products, services, and customer base. After, it needs to define the goals as ecosystems. Measuring the added value that new products and services bring to clients should be a top priority. Meanwhile, on the more technical side, the two aspects should be paramount. They are technical transparency and a sufficient level of data protection to ensure privacy and regulatory compliance.
Digital services need to maximally meet the needs of customers. For instance, they can include the major (core-banking) services; additional services such as aggregating information from multiple sources, bank accounts, and so on; and extra services such as offers from industry-specific fields (travel agencies, ticket services, social networks, and others).
Creating such a financial services ecosystem requires partnerships with Fintech startups, technological companies, others related to customer service organizations. The right partnership creates a symbiosis that enhances the benefits of each partner.
In general, banks, insurance companies, and e-commerce understand that financial technology is the future. The changes cannot be ignored. It is simply not in favor of the banks, various industry-specific businesses to move separately from the Fintech solutions.
The development of Fintech tools today is an important competitive advantage and a guaranteed way to come out ahead. In the near future, financial technology will penetrate even deeper into other industries, giving them the opportunity to evolve and expand.
Most of the challenges facing banks and businesses today require an integrated approach to IT infrastructure. That is why at FreySoft we have chosen the path towards solving any client problem related to digital solutions.
Our implemented projects show that companies need complex solutions. Clients do not always have the desire and ability to study their subtleties and look for the most suitable options. Our task as a development vendor is to take this headache upon us. We are ready to put together the perfect constructor for the needs of a particular customer.
Make sure you have access to the IT talents and skills to win!
FAQ: Fintech integration with banks
API is a ready-made software mediator that allows two applications to connect with each other and exchange relevant information. With a Fintech app system integrated into a company, you can quickly add and remove new digital services that are necessary for your business and customers. This way, open APIs facilitate fruitful partnerships between banks and fintech companies that offer demanded niche solutions.
Fintech consulting cover the next key services:
– Mobile and web applications
– Open banking
– Artificial intelligence
– Cloud infrastructure
– Big data and analytics
Our FreySoft teams implement new banking technologies that improve efficiency and ensure data security and integrity. We specialize in developing fintech applications to strengthen your technology stack, reduce costs, and identify cross-selling opportunities.
Traditional banks refer to financial institutions that are licensed to accept deposits from its customers and make loans. On the contrary, Fintech include companies (most of them are startups) that provide exclusively financial services using digital technologies. The major differences between Fintech and banks lie on their way of doing business, regulations, growth potential and risk factors.
For banks, Fintech is a modern opportunity and a key component of the business model that allow to attract new customers and make personalized approach to loyal users. Banks get access to the latest technological services without wasting time and their internal resources on their development. For example, mobile Fintech apps provide clients with information about accounts and products in the banks, the key items of expenditure, help to make regular payments and expand opportunities for investment. In this case, the customer himself will manage his data: it is he who will decide what information and with which bank to share, for how long to allow access, etc.