By ForexNewsNow

Banks “forced” to embrace tech innovations in order to survive

We’ve seen an obscene amount of banks collaborating with giant companies like Google, Amazon, and Apple to create an innovative approach to payments and make banking services more available. This trend has been going on for some time now and it’s a mix of these major tech companies wanting to provide a variety of services for their customers and with banks increasingly seeing the importance of adapting to their customer’s needs and staying up to date with all the fintech trends and services.

Now more and more banks are willing to talk about the necessity to evolve and collaborate in order to stay relevant and be able to compete with other entities. This is a global trend that surpasses the banking. Everyone is in on the importance of online presence and simplified technology application to their services. Financial companies are starting to adopt these technologies as well and become better accessible. The Forex brokers in Kenya are a primary example, as they have started moving to more simplified payment processing systems rather than banks. The same can be said for the fintech. So now, more and more people are speaking out about the importance of moving banks and financial technologies closer and collaborating on a more intense level.

“Banks are Fintechs”

Recently at a panel at CNBC’s East Tech West event in Guangzhou, China – David Rafalovsky, chief technology officer at Russian state-owned lender Sberbank brought up an interesting point about this worldwide trend of a bank going into fintech. Rafalovsky expressed his frustration with the common distinction that people make between fintech firms and banks. Rafalovsky believes that banks are fintech firms.

At the event, Henry Ma, the chief information officer at WeBank which is a Tencent backed online bank, pointed out that technological innovation opens a lot of doors for people that wouldn’t be able to access the traditional banking services since it requires less complicated procedures and is generally more widely accessible. Ma specifically referred to the group of people who benefit most from this as an untapped market, because really for the longest time this specific demographic was highly untouched by the financial sector.

According to the World Bank, around 1.7 billion people are “unbanked” meaning that they don’t have an account with a financial institution. And the reasons for that can be plentiful, but the main cause is that banks are still exclusive to some for a variety of reasons. Some people don’t have the necessary documentation some people didn’t qualify because of other reason, some may prefer to be more in control of their money. So the fintech and the recent rends are really a “golden opportunity” as mentioned by Henry Ma for these financial institutions to gain a lot of new clients. Both executives agreed that banks actually need to behave more like tech firms in order to keep up and avoid becoming useless.

The future of Banking

It might be too early for us to start thinking about banks becoming extinct but it might be for them. With Google, Apple and Amazon offering their services for transactions and Facebook even releasing its own cryptocurrency, it’s becoming evident that traditional banks have some competition. It’s not necessarily exclusive of banks, because these companies don’t really have the licensing to conduct these transactions, so they definitely need the backing of the banks and that what apple and google are doing, with Google giving more power to its partners. This is an inevitable process that will force more and more banks to seek the opportunities to incorporate more fintech into their banking systems and to collaborate with different companies that already have the trust of the consumers.

This doesn’t mean that banks don’t bring anything to these collaborations, besides their licenses to conduct these transactions. Banks have the capacity to compensate for the overall mistrust that surrounds most of these major companies, who have previously mishandled customer information.

This is a big reason why Facebook’s cryptocurrency – libra is getting so much pushback and is getting abandoned by major partners like visa and Mastercard that pulled out of the project because of Facebook’s unwillingness to embrace regulations that come with working companies like Visa and MasterCard to who answers o regulators. So these companies thought more innovative still lack a lot of qualities that banks bring to the table.

Comments made by Rafalovksy encapsulate the approach that will most likely bring the results that can be beneficial for all parties involved. It’s important that the banks are well-attended to the needs and standards of their customers and embrace technological innovations while maintaining their regulatory systems that make people trust these entities in the first place.

Like the chief tech officer of Sberbank said many banks, perhaps not all but many, are well-positioned to build brand new products. Banks really have to master technology in order to increase customer convenience and to keep them from going to less regulated, newer companies.

By ForexNewsNow