Banks and fintechs after Covid19

Talks about the “new reality” and “the world will never be the same” flooded the Internet, and the society is pretty fed up with those words and phrases. Nevertheless, changes are already taking place, and it would be foolish to ignore the obvious - because now it is imperative to understand which way the wind is blowing to be able to adapt to circumstances quickly.

Advapay has analysed the situation in banking and fintech and shares its ideas and predicts, what changes we may await soon.

Merging fintech and retail (services) or appearance of new fintech products

At the time of the pandemic, we all were witnesses on how production or service companies adjusted their strategies to adapt to the changes. For example, Bolt Taxi became Bolt Food Delivery, alcoholic beverage and cosmetics companies set up a sanitizer production line, and clothing manufacturers began to sew face masks. Fintechs can also learn from this and merge into non-related fields to develop new products and services adapted to the new demands.

What changes could we expect from such merging? For example, Fintech apps that will become a marketplace with not only financial instruments but also retail products and services. From one account, consumers can pay for utilities, order food, and taxis, play online games, or receive great offers from stores based on their geolocation.

What if fintechs won't take over this niche? Then this niche will be snatched by retail.

Collaborations between banks and fintech

Still, the main advantage of fintech projects over banks is user convenience; when everything can be done in a couple of clicks on a smartphone, without the obligation to show up, wait in long lines, and face “ladies in the window”. Even the most advanced banks are inferior to fintech startups in the field of technology and UX. Now, during the lockdown, banks felt the need for both. And most likely, they will try to catch up. One of the easiest and most effective ways to innovate is not to create a “new idea”, but to collaborate with those who have already managed to do it.

What does this mean for consumers? It means new services and products and improved quality of existing facilities.

What does this mean for fintech? There will be new opportunities for partnerships and creation of new products in cooperation with banks. We can predict that in 3-5 years, banks will no longer focus on end-users, but on business customers (such as fintech) and will become B2B providers.

Intrabank Reforms

The pandemic and the forced transition to remote work will expose the heaviness, cost, and inefficiency in many large structures, including banks. It is expected that “when everything is over”, banks will have to shake themselves and revise the strategy and principles of the internal organization of processes. What does this mean for consumers? That access to banking services will become more flexible and “user friendly” - many services will be carried out remotely, and the response time to applications will be significantly reduced.

What does this mean for fintech? That traditional banking services can become more innovative and competitive.

The growth of online trading and online services

By many what is happening today with businesses, including the transition to online trading, is considered as a temporary measure. But in vain - the desire and willingness to buy online everything that can be sold will only grow (even when “the world gets back on the same path”). When many consumers were forced to make purchases only through the Internet, they realized that online shopping offers more convenience and saves time; and we are quite sure that they will never return to the past and old habits. Moreover, not only all retail will go online, but also other service providers. Education, fitness, medicine and many other industries that are not obvious to the virtual world will very likely use the full potential and increase their online presence.

What does this mean for the consumer? You should expect new online services, more convenient interfaces, and faster delivery.

What does this mean for fintech? New niches for Internet acquiring and new business opportunities.

Changes in the regulation of banks and fintech

We expect that Regulators, central banks, and governments to revise legislation and make changes in favour of a new model of banks - focused on innovation in payments and adapted to the new economic reality. For example, this may concern the regulation of digital/virtual currencies, the requirements for online onboarding (connection) of customers, and other changes that are aimed at automating services, transferring them online, and developing innovations. For example, China has already launched its national BSN blockchain platform, and the Estonian regulator has instructed banks to consider deferral of payments and offers to reduce requirements for company liquidity and capital adequacy. We hope other countries will catch up too.

Despite different articles on how to be prepared for changes, we understand that it is impossible to be always prepared for changes, but we believe that we can adapt.

About: Advapay provides Core Banking platform, consulting and licensing for fintechs and digital banks.