Financial technology is here to stay. Unfortunately for banks, customers now expect more from them due to their positive experiences with fintech startups and mobile wallets. Fintech companies provide services like lending/ offering credit to salaried individuals and small businesses, mobile wallet and payment services, be an aggregator, robo advisors for making investments and digital currencies.It is due to this and also because of demonetization that fintech startups have seen a huge increase in business, funding and hiring.
Banks have been forced to come up with their own mobile wallets and other financial services to make things easier for consumers. The challenge for banks is that they cannot build or come up with new innovative technologies like startups can. This is because technology is not their forte! Startups who want to become a bank on their own are slowly realizing that it is not easy to reach and manage the scale that banks are at today.
Banks and fintech startups today realize that they need each other more than they realize. Banks need startups to come up with new technologies and systems that can be scaled up quickly and startups need banks for in order to tap into a ready base of consumers. A fintech startup, due to its small size is able to keep its ear to the ground and provide innovative solutions. A bank can guide a startup in achieving scale and keep its large consumer base satisfied.
So one would wonder, why doesn’t a bank just buy a startup or setup a team of engineers who can do this? The answer is culture! Traditional banks always move slowly. Bankers have been trained to avoid all forms of risk. However, a startup is agile and moves very fast. How do you get two different sets of people to work efficiently? It does not work always and hence, it is better for the bank and the startup to agree on their goals and work separately. This is a boon for young students and executives as a fintech startup which handles tech applications for a bank ensures that young executives have a steep learning curve.