Why banks are outdated and the rise of fintech
Banco Monte de Paschi di Siena, the world’s oldest bank, was founded 548 years ago, and the basic functions of a bank have not changed much since then. However, technology has evolved greatly, and both customer needs and expectations have changed considerably.
There is a glimmer of hope moving forward – the high-tech revolution has paved the way for a range of ‘fintech’ companies. These organizations merge both financial services and technology to bridge these 500 year-old gaps.
Read on as we delve into some of the main reasons why traditional financial institutions are outdated, and how fintech companies are revolutionizing banking.
Arcane technology vs. fintech newcomers
Banks struggle to innovate due to arcane technology and systems that don’t work today. In an effort to stay up to date, banks have added new tools and features on top of their older inflexible technology, creating an ineffective, layered system. The fact that the number of users at these institutions has been growing has exacerbated the problem. It’s been a challenge to migrate customers from old systems to new ones, and attempting to do this has increased institutions’ operating costs. The layered system has trapped banks in a vicious cycle where it’s nearly impossible to adequately add new features without starting from scratch.
Fintech firms have cropped up as an alternative to traditional financial institutions, offering new technology and competitive products. They have built applications that use flexible, modular systems, enabling them to grow and scale their technology without building an expensive infrastructure (e.g. servers). Instead, they rely on flexible, cloud-based technologies (e.g. Amazon Web Services) that significantly reduce costs, and drastically increase the speed at which they can grow.
Hidden fee culture vs. transparent pricing
Older banks have a tendency to charge customers for a lot of little things that add up. Being late for a credit card payment, over-drafting their account, withdrawing money from an ATM, and sending a transfer are all reasons why customers may get charged. A lot of the time, customers are unaware of these fees, which creates negative customer sentiment towards banks. Customers are no longer willing to tolerate this hidden fee culture.
Fintech companies recognize this issue and are on a mission to fix it. By offering a new pricing structure that eliminates hidden fees, customers know upfront how much transactions, ATM withdrawals, and other banking decisions will cost them. Having this information gives them a better idea of what they’ll owe at the end of each month, helping them avoid nasty surprises.
Fintech companies, like Finch, are even getting rid of some of these fees altogether, making banking more affordable for customers.
Branches vs. mobile debate
As things stand, most large banks have slow and confusing mobile apps that make it difficult for customers to take care of their banking needs remotely. This creates the necessity to visit a branch.
Customers now expect more flexible, on-the-go options. More specifically, they seek out high-quality services when and where they want them.
New fintech apps offer customers more convenience and accessibility when managing their finances, allowing them to create a better and personalized user experience.
Banks vs Fintech – Making the right banking decision for you
Older banks rely on their reputation and history to retain existing customers and acquire new ones. However, customer needs are changing, and banks are struggling to keep up. Arcane technology, hidden fees, and inconveniences in accessing customer service are among the main reasons banks are outdated.
Fintech companies are creating a new banking experience for the 21st-century consumer. New technology, transparent pricing, and convenient access are all ways that fintechs are giving banks a run for their money.
So who is the real winner in this competition? You are.
Does your bank serve you how you want it to? Is it time to switch?