Partnership between traditional banking and Fintech companies

Nearly 10 years ago, we used to pay mostly in cash. At that time we could not predict that we would be able to pay in 2018 by mobile phone or in cryptocurrencies and purchase by using fingerprint or smart rings, bracelets or watches. Common sense tells us that it will be possible to create economic value, courtesy of innovation in the long run.

Changes in the retail banking space are already noticeable. As there are more and more digital products and services nowadays, advertising activity on the internet, including social networks, is increasing. During the creation of products and services, emphasis is being given on the need of clients which, in turn, is displacing remote services. At the same time, banking technologies in many countries across the world are creating the ground for innovations and moving them forward.

Almost on a daily basis, technological innovation is taking place in the banking system. Today, internet banking and mobile banking have become ordinary communication methods between a client and a bank. It is also important to underline that these services are becoming sales channels of banking products. Today's trend is a transition to use services where the banking product is only its part. Therefore, banks have to interact with innovators in the world of digital technologies. Such cooperation for banks means a growth of their business.

It is possible to mark out the technologies that are most significant for banks nowadays, such as Application Programming Interface (API), cloud solutions, big data and analytics, artificial intelligence (AI) and machine learning, robotisation of processes, technologies of the distributed databases (blockchain) and the Internet of Things. Among the main priorities of digital transformation for banks are increase in the number of channels for receiving digital experience, maximising the use of mobile and social technologies.

The demographic structure of banks' clients is cardinally changing nowadays. More and more young people who perfectly understand modern technologies are becoming banks' clients worldwide. Potentially, all owners of smartphones are capable of joining them. The ratio of the price and quality, speed and opportunity to solve problems remotely come out on top for the young generation. Therefore, it is important to look for new channels for communication with a developed modern society.

In modern banking system, the important thing is not only what the client receives, but also how the client receives it, what experience of interaction with a product or service remains, the convenience and enhanced user experience in using new banking interfaces etc. Therefore, the main task of bank is to generate comfortable conditions for end users, create customer-centric services, develop multichannel communication, fast access with ease in using banking services, convenient integration and extremely exact targeting and personalisation, transparency and no surprises in the bank commissions. This is what clients want from their banks.

There is an opinion that the information technology (IT) companies in the future will become main competitors of the traditional banks. So, in order to be successful in the new competitive field, banks should not be afraid of moving from traditional character to innovation.

The number of partnerships between traditional financial institutions and financial technology (Fintech) companies will grow. Banks, therefore, need digital examination, and Fintech needs an opportunity to scale up decisions. Products of the financial technology companies allow consumers to get perfect experience, but such players haven't enough qualification in customer acquisition.

Traditional banks have already won the heavy fight for customer acquisition, but now they should work even harder to create a digital business. Cooperation between traditional financial institutions and Fintech takes place across the world in different forms - ranging from the creation of accelerators to the merger of the promising companies and direct investments through corporate venture funds.

But despite the growth of popularity of various financial services, banks still remain the most reliable instrument for storage of means of the private users. When it comes to crediting money or mobile purses, the consumers show their inclination towards small and more flexible services, although people still prefer to keep their money with banks. If the bank introduces new services and doesn't become static, it, all the same, remains preferable to the client in matters of classical financial services to any other financial service.

To be objective, it is also necessary to consider that financial crisis has badly affected trust in a banking system in general, distribution of mobile devices has shaken monopoly of the banks for distribution of financial services, smartphones have completely changed the pattern of payments - having made them personalised, and at last the volume of data and computing power has grown more by times.

Of course, the banks have to and will introduce an innovatively focused system of management alongside innovative products and services. At the same time, information and network communications shouldn't become the only way of communication with the clients. In the banking business, there is a considerable section of consumers of financial services to whom new financial products or services are not always understandable. It is, therefore, necessary to serve such clients taking into account the level of their information and financial literacy, coding habits and traditions.

ABM Kamrul Huda Azad is CEO of BA Exchange (a wholly-owned subsidiary of Bank Asia) and Hanna Vashchyla, a PhD in economics, is Project Manager of an IT company.

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