Although a majority certifies that the traditional banking sector retains a dominant position in the market, the FinTech have nevertheless demonstrated since their arrival, that the role of “intermediary” banks could be questioned.
The evolution of FinTech
According to fintech ranking experts, since the arrival of FinTech, venture capital investment has been declining. Overall, investment in the banking sector for 2016 is estimated at 20 billion euros.
The reasons for this success are three. First of all, it’s a digital revolution that has changed the financial sector. It is a collaborative economy that is based on participation, mutual help. Finally, it is a mistrust of the citizen for banks and finance. With FinTech, there is a political will to facilitate and enhance the development and that is why its quality is to be a fast service that can allow, for example, to obtain a loan between 3 to 10 days.
In addition, the FinTechs also allow the establishment of transparency on the Internet especially in a loan between individuals and professionals where the community effect.
Competition for the banks?
The application Lydia allows for its part to repay quickly loved ones with the sending of an e-mail or the photograph of a QR code, or to request a refund by text message. The Slimpay application (the most successful in France), allows merchant sites to simplify automatic debits. On the crowdfunding side, Pret Union, a loan platform, has reached the milestone of 60 million credits financed in January 2016. There is also Lending Club, the platform that allows borrowing without intermediaries. Foreign currency, the French Weeleo wants to finish with the traditional exchange offices and facilitate the exchange of currency between individuals via a mobile application.
Although these start-ups are dusting off the operating modes, banks still hold a largely dominant, sometimes overwhelming position. Some of these new players will rely on banks and others will compete with them.
Nevertheless, the banking sector remains the most affected in the world of finance with the emergence of FinTech because the regulation imposed on banks has facilitated the emergence of these new players. The multiple regulations imposed on banks combined with the use of the internet open the way to strong competition with start-ups not penalized by these regulatory constraints and, above all, having more flexible structures with much lower charges than traditional banks. .
With digitization, banks have to deal with a whole range of threats including payment with the emergence of alternative means of payment that compete directly with traditional payment cards.
In a recent study, Goldman Sachs estimates that in the US market alone, nearly 11 billion of traditional bank revenues are impacted by these new players. The traditional banking industry will have to face competitive challenges that it has been unaccustomed to until now. These losses of turnover will force the banks to make strategic choices on almost all of their activities including the collaboration or buy-back of start-ups.
