The Role of Fintechs in the Immediate Future of the Banking Industry

GDS Modellica

04/04/2022

The financial ecosystem currently finds itself immersed in a profound process of digital transformation. The rise of digital financial services as a result of the pandemic is clear for all to see. This has obviously been encouraged by changes in consumer behaviour, but it is also due to the emergence of improved access and easy-to-use technology.

Fintechs have also played a key role in this transformation. These are businesses that aim to provide simple and transparent financial services using technology (hence the name), and the democratisation of financial services is a fundamental part of their business model. They aim to provide consumers with solutions that are simple, attractive and easy to use, and this model has since been adopted by small businesses, big tech and international banks. They have found their niche, and now, they are looking to expand their customer base.

The reason that fintechs have been so successful lies in the fact that they provide consumers with an attractive and easy way to manage their day-to-day finances. At GDS Modellica, they believe that “the pandemic has been beneficial to fintechs because consumers have been forced to change the way they manage and use their money. As online purchases, digital payments and 100% mobile operations have increased, this has allowed fintechs to develop their products and services”. With this in mind, Antonio Garcia Rouco, managing director at GDS Modellica, also points out that customers are increasingly moving away from expensive credit cards and are instead opting for flexible, better value payments, and this, in turn, exposes them to greater risk.

As a result of all this, the race to attract digital customers have become a genuine battlefield between fintechs, traditional banks and tech companies. Fintechs currently add the most value by offering innovative alternatives to traditional banking channels. Originally, fintechs were seen as competition. Now, they are perceived as a chance to develop more efficient processes, create synergies and explore new business opportunities. According to GDS Modellica, in this situation of increasing digitalisation and branch closures, forging partnerships with fintechs is key for traditional banks if they want to become more digital, more profitable, improve internal communications and satisfy the needs and demands of today’s consumers. It is imperative that they undertake their own new digital initiatives in an effort to blur the boundary between digital and physical.

This transformation of financial services also brings with it changes to the economy and greater competition, with companies seeking to provide faster, personalised services whilst ensuring that they are secure and compliant. The appearance of fintechs has created a new niche in the market, and this will doubtlessly lead to the emergence of more operators and products designed to raise quality standards and reduce consumer risk. Fintechs will lead to significant changes to the way that financial business is done by improving engagement, the customer experience and increasing satisfaction and retention. Understanding what motivates customers will make it easier to offer them the products and services that they need. Therefore, fintechs will play an indispensable role in the financial world, both now and in the future.

Antonio García Rouco
Managing Director de GDS Modellica