Will the future of financial services be driven by FinTech?
Across the globe, the FinTech revolution is picking up pace. Financial tech companies are being recognised as those that can provide opportunities to, and solve legacy problems with, the wider financial ecosystem.
In addition to this, regulatory changes including PSD2 and Open Banking is benefiting FinTechs by granting them better access to banking rails, helping to drive this growth.
For a lot of new market entrants in the financial world, the focus is on improving experiences for consumers. Challenger banks are becoming more mainstream, and e-money issuers are utilising their licences to provide alternative banking solutions that tap into niche markets – offering financial services to the underserved and underbanked, as well as under-18s, and those with poor credit.
With FinTechs already gaining market share in the B2C space, incumbents are now finding themselves being challenged in the B2B space too, with FinTechs unbundling transaction banking services.
As well as offering innovative technologies to customers, new entrants have recognised that they can extend their services by calling on fellow FinTechs. A PSP, for example, could partner with a cross border payment processor to deliver low-cost international transfers to its merchants rather than doing this via an incumbent that could charge much higher fees.
Incumbents need to evolve to meet increased demand
Corporates are starting to ask for more from their banks, particularly when it comes to treasury management. While corporate treasurers already have a range of payment options at their disposal, there are niche areas within the payment ecosystem that could benefit from optimisation. One such area is FX payments.
Managing FX payments and keeping the cost of international payments down can be a burden for corporate treasurers. However, by gaining access to a real-time FX trading platform via a specialist FX payments company or broker, corporate treasurers are able to trade foreign exchange more efficiently, as well as make international payments at a significantly lower cost.
We’ve seen a shake-up in this area of banking; not just in managing FX and cross border payments more effectively, but also in reconciliation, expenses, analytics, fraud, lending, and compliance.
Can banks join the FinTech party?
‘Collaboration’ has replaced ‘disruption’ as the word used to describe the relationship between banks and FinTechs. Rather than competing for market share, many are now choosing to work together, and are starting to reap the benefits.
FinTechs are able to focus all of their attention into niche areas of transaction banking, and incumbents would do well to embrace the solutions they offer to complement their existing offering. If they choose to ignore it, in the not too distant future, banks could begin losing market share to FinTechs in the B2B space too.
Want to find out more about the changing landscape of B2B banking and payments? Download our white paper ‘Re-drawing the Map’.