Fintech start-ups will not kill traditional high street banks, according to Professor Bjorn Cumps, from the Centre for Financial Services at Vlerick Business School.
In fact, the emergence of peer-to- peer lending platforms such as Zopa and money transfer services like TransferWise presents an exciting opportunity for traditional banks and new entrants – if they learn to collaborate.
Cumps, who hosts the ‘Fintech Futures’ workshops at Vlerick in Brussels, lists regulation, trust and client inertia as the most important reasons why it will be difficult for new fintech start-ups to dominate the financial markets in the way Uber and AirBnB have, saying:
“The financial sector is much more strongly regulated than most other markets and these strict regulations make it hard for start-ups to compete with established banks. Also, despite recent problems, customers still trust their banks and it takes time to build this trust. Finally, don’t underestimate customer inertia – people don’t like changing their bank and, while they will experiment with new products, there is a long way to go before they ditch them completely.”
He states that, while banks are experiencing some disruption in their markets, those that collaborate effectively with new fintech firms are likely to prosper in the long-term:
“Banks know that developing their own new innovations and technology will take significant time and resources. So why not team up with a new fintech company? Both can then focus on what they are good at and benefit from each other’s strengths. TransferWise is already working with local banks and ING has formed a partnership with Kabbage, a new platform that provides loans to SME’s.”
“The icing on the cake is that while the banks and tech firms can refer clients to each other and work together to cover the whole market, their customers also benefit from a better and cheaper service. What’s not to like?!”