Fintechs and Big Banks:

How innovation is shaping finance for businesses and consumers

Contenido Técnico elaborado por Payhawk

Fintechs have helped both companies and consumers understand and manage their finances in new and better ways. We know that for businesses both big and small, a solution like ours will make everyone’s life easier. But we’re no stranger to meeting sceptical companies who are used to operating in more traditional ways.

This ebook is designed to explain the benefits of fintech and how fintechs and banks work together in our wellestablished and regulated financial system.

Hristo Borisov

CEO and Co-Founder, Payhawk

Why fintech?

Fintech — the intersection of financial services and technology — generally refers to companies that bring automated and  improved financial services to individuals or businesses. The word ‘fintech’ goes back to the early 1990s, but the term only started becoming popular around 2014. 

Three major factors accelerated the growth of fintech:

  • The 2008 global financial crisis, when consumers started to lose trust in traditional banks.
  • The explosion in the number of people using smartphones around the world (49% of the population in 2016 grew to 78% in 20201).
  • A shift in regulation enabling financial innovation (learn more in section 3).

The top 10 markets in consumer fintech adoption (% digitally active population)

Traditional banking services like deposits, loans, payments, and personal finance management stayed largely the same for many decades. This lack of movement existed because the main actors (big banks) historically had a low incentive to innovate coupled with an inability to move at speed. Market regulation also made it difficult for new companies to enter the banking market, making competition scarce.

Fintech companies, with their lean and flat structures, new business models, and relentless focus on customer outcomes, have been able to adapt to new technologies and trends much faster. This agility has changed how we do banking today and will continue to do so. But how and why are fintechs able to offer these improved services?

Focusing on the customer

 Fintech companies succeed by making people’s lives easier. Fintechs can adapt to customer needs better than traditional banks, thanks to their often excellent user experience (UX). How easy is it to order food or a taxi from your smartphone? Isn’t it a nice touch when Netflix recommends movies based on your preferences? Now, think about how that intuitive and personalised experience translates to your finances.

Fintechs have revolutionised how we deal with money, both personally and in the business world. These days it’s a whole different ball game, from sending payments via messaging and having all your card payments in one single card, to allowing business owners to control real-time company spend.

UX is at the forefront of these new and improved services, creating accessible and straightforward applications to operate in the financial services market. On the other hand, traditional banks have usually seen the end-user experience as the last and least important part of the equation.

Customer engagement is also a cornerstone of most fintechs. Customer feedback and ratings are crucial for product development and attracting more customers. Fintech companies often try to create communities around their products to help generate enthusiasm and spark ideas for further improvements. Most fintechs won’t be happy accepting the traditional approach of using colossal marketing campaigns to blast out advertising in the hope of attracting customers. For fintechs, happy customers are the best customers as they’re likely to be the best brand advocates.