How Fast Moving Fintech Industry Ruining the Market for Traditional Banking

Before diving into the main topic, first, you need to understand the two main words present here. One is ‘Fintech Industry’ and the second one is ‘Traditional Banking’.

Simply in ‘Traditional Banking’, we put our money in the bank, and the bank uses it to give loans to different persons/organizations. Lenders pay interest on it and the banks give us a portion of that interest.

Now let’s come to the word ‘Fintech’. The Fintech industry comprises companies that rely heavily on new technology to provide financial services. Such as – Paytm, Zerodha, Groww, Paydeer, Phone pay, ZestMoney, etc.

Now you have a good basic idea of each segment and it's time for you to go deeper into the article.

Here you are going to know about the process by which these fintech companies are ruining the businesses of the traditional banks.

• Target: Fintech companies have a specific target audience/ segment, such as some specialize in giving loans (Zest Money), some in insurance (Acko), and some in trading and investing (Zerodha, Groww), and they target the audience accordingly. On one hand, these fintech companies focus more on customer experience and satisfaction, whereas banks are for everybody and focus mainly on the system. This reliance on the system is making them slow and giving room to fintech institutions.
• Coverage/ Reach: If it were the 1980s then I would say banks have better reach and penetration. But standing in the 2020s and with the internet boom, these fintech companies have penetrated more than the traditional banks and are just a few taps away through a smartphone. Anybody with a smartphone can avail of the facilities offered by these fintech companies. whereas banks are needed to be opened in an area and can serve the people up to a certain distance only, and this is holding back the traditional banking system.
• Operational Efficiency:- Operational Efficiency is another aspect where the fintech companies are growing more compared to their traditional counterparts. As they are mainly operating over the internet and very few branches are out there, everything is done in the background by a short set of teams and done quickly. Whereas big banks have multiple hierarchies to do the job that holds them for rapid operation.
• Just I remember that in the previous days to open a Demat account we needed to sign multiple papers at the banks and submit and wait for a month or so to get the account activated.
• But now all we need to do is click/tap a few buttons, give the details and the account will be ready within 3-4 days or sooner.
• Technological Dependency: Our new market entrants are relying more on the current technology than the traditional ones. As a result, they can incorporate any new change faster than the traditional banks and this attracts the new fast-moving generation that hates to wait in long lines.
• As an example, previously to submit KYC we needed to bring/download a form, fill it up, and then submit it to the bank personally along with the photocopies of the documents.
• But now all we need to do is enter the details online along with a scanned copy (known as e-KYC) of the document and that’s done.
• Moreover just look at the UPI system that has changed the mode of small payments in such a short timeframe. Almost anybody with a smartphone can use the facility and people are using it also at a rapid rate.
• There is no need to wait in a long line to just submit the details or to withdraw cash. So this dependency on modern technology has made the process much faster and more hassle-free and that is why more & more people are preferring it and that is giving an edge to these new companies.
• Rules & Regulations: Banks are there for a long period and are subject to more rules and regulations compared to their newer counterparts. They are being controlled by the Federal Banks of their respective countries and governments. These rules and regulations are holding them back to take risks and holding the growth. And this is giving room for the new companies to emerge and fill the gaps with higher risks and better rewards.

Paydeer Services Pvt Ltd. is a Digital Payment Platform Company established in 2021. With our excellent payment services, 2500+ distributors and more than 15000 retailers have already joined us