CB Insights is a tech market intelligence platform that covers key research on the emerging trends in the fintech and financial services industry. Its report, Building The Bank Of The Future, reviews how the financial ecosystem is being transformed amid competition between fintechs and financial service incumbents. In the report, Max Abramsky, Associate Intelligence Analyst of Fintech at CB Insights, analyzes the 5 trends shaping the future of banking. Here is a summary of his findings:
1. Banking APIs are enabling developers to build fintech
“Open banking enables the creation of plug-and-play fintech APIs by leveraging open financial data. These APIs enable third-party developers to build applications and services around data from financial institution.”
2. Partner bank model lets tech companies act as banks
“In the US, fintech startups and banks are partnering to leverage each other’s strengths. For the two parties this is an ideal partnership because banks bring regulatory infrastructure, while fintechs provide consumer-facing tech, national reach, and distribution. Banks are enabling fintechs to launch credit facilities, FDIC checking accounts with branded debit cards, and savings accounts.”
3. Fintech unbundlers begin rebundling
In the past, fintech startups attempted to unbundle the products and services of banks by focusing on cutting margins and customers needs. Recently, fintech startups have begun rebundling their products and services in order to compete more directly with traditional banks, such as by launching debit cards or chequings/savings accounts.
4. Differentiation in consumer banking products and services
Successful fintech startups offer consumer banking services that differ from traditional banks, such as hybrid checking accounts, debit rewards, early access to paychecks, credit for consumers with no history, and loyalty rewards. Their competitive edge attracts millenials.
5. Tech platforms and large banks want in
Tech platforms like Facebook and Apple, and large banks like Goldman Sachs and JP Morgan, have begun forming partnerships and investments with one another and with other fintech startups, demonstrating their interest in the future of digital banking.
As Abramsky highlights, digital-only banking seems inevitable in the near future. Fintech has certainly contributed in this direction, pushing traditional banks towards more technology and new product offerings.
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