Fintechs Could Be Banks’ Biggest Rivals In Years To Come, That’s If They Aren’t already

Fintechs have become a commonly used and important terminology in our world today. Wherever you look, there’s always some news popping up about fintech and the innovative ways they are changing the traditional banking and financial system. Fintechs are computer programs and other technology used to support or enable banking or financial services and are one of the fastest-growing areas for venture capitalists.

It’s not a new thing to say that the world is changing and that technology is taking a place in every sector and/or industry in the world. One important place where technology is revolutionalising is the financial world. For so long, banks have been the pillar of the financial world and have maintained an unrivaled and dominant position due to several factors that range from a highly regulated environment to the heavy dependence and a long history of being the sole provider of financial services, etc. These banks have maintained their dominant positions around the world, and especially in Africa where the financial system is not as developed as the rest of the world. But this is changing, and it is changing so fast…

Fintech may have started to become a source of worry for banks. Just like how the presence of innovation and new technology makes old methods obsolete, fintechs are beginning to push banks out of the limelight. Fintechs are capitalizing on the shortcomings of the traditional banking and financial system and are providing services that are changing the financial space. According to a 2019 report by Forbes, the number of unbanked people in Africa, Asia, and Latin America surpassed a whopping 60 percent, irrespective of the fact that a huge percentage of these unbanked people have access to mobile devices and the internet. The operations of fintech are fast becoming a threat to banks and associated financial services as the fintech landscape threatens to disrupt the traditional banking and financial systems if they do not find new ways to innovate their services.


How did fintech penetrate the areas that the traditional banking system couldn’t?

The idea behind fintech startups is basically to leverage the “abandoned areas” and make something out of them. Fintech startups are born out of the burning desire to bank the unbanked as fill the gap left by the traditional banking system.

Fintechs are able to penetrate these spaces using technology. Compared to the last decade, more people are using mobile devices and fintech to reach their customers or potential customers with what they already have – a mobile device. The widespread use of mobile phones, devices, coupled with other factors, have given fintech startups the success stories that they have today. In Africa, the availability of fintech startups like M-Pesa, Flutterwave, etc., has provided the channel for more than 30 million Africans to send and receive money without having to use the services of a bank. In Asia, WeChat – a chat plus financial services platform, Alipay, and the rest of them are providing financial services and banking the unbanked. They provide people with the channel to send and receive money and even borrow money without having to seek these services from a bank.

Another thing is fintechs are highly specialized companies, thus they have an edge over banks and other financial services providers that provide numerous services. Let’s look at some of the major characteristics of fintech startups that may be giving them an edge over the traditional banking system.


These characteristics include;

  • They are borne out of the need to solve a specific problem. Today we have a plethora of fintech startups available and they continue to thrive because each one is focused on solving an identified financial problem, it could be to help people achieve saving goals, it could be to provide loans, or even be a payments platform.
  • Fintech startups are highly specialized. This saves them costs and enables them to optimize their operations.
  • They use technology to achieve a competitive advantage over the traditional banking system and have a better understanding of customers.


The following are some reasons why people may prefer fintech to the traditional banking system;

  • Fintechs generally provide better services. Studies have shown that fintech startups provide their products and services in a way that gives their users the financial freedom that they seek to have. While the traditional banking system is rigid and might not be fully customer-focused, fintechs are flexible and tied to making customers happy and satisfied. They also have better customer service too.
  • Fintechs and their products are easily accessible. Fintechs and their products can be accessed from anywhere without having to visit a physical location. This gives them an edge over the traditional system as people have to visit a physical location to access bank services. The coronavirus pandemic helped fintech startups to thrive as people were confined to their homes leaving the major and in some places the only way to access financial services in the hands of these fintech companies.
  • Fintech startups have better branding. Fintechs brings a refreshing feel to the financial world and employs modern marketing tools such as gamification that make financial processes less cumbersome to users.
  • Fintechs require lesser documentation and provide services seamlessly. For instance, if one was to request a loan from a commercial bank, the process is usually irksome and requires many documents to be provided. There is still a huge chance of getting rejected too. For fintechs, the process is different. People do not need to join long queues or suffer the uncertainty of getting the loan they require. Fintechs generally make everything easy and less stressful.


Challenger/ Neo banks: the biggest rivals to commercial banks

Challenger or Neo banks are digital-only banks. They are like commercial banks but the difference is they provide all their services via a mobile platform and have no physical location to meet with customers. They offer products in partnerships with other banks. Neo banks have created a paradigm shift in the banking industry. They provide all or almost all the services that commercial banks provide without having to maintain a physical location. They even provide debit or credit cards for customers. Customers can create an account and request a debit or credit card that can be used anywhere, without leaving a spot.

Neo-banks like Africa’s Kuda bank and Europe’s N26, have become rivals for commercial banks that have to maintain physical locations following their success. Neo banks are still in their nascent stage and experts believe that in the next decade the traditional banking system may have to adapt to the models that these neo banks operate.



Fintechs are generally still in their development stage but have shown huge potentials for growth and are strong rivals for the traditional banking and financial system. The availability of fintech startups specializing in payments, loan provision, insurance, etc., should make the traditional system uncomfortable and be on its toes looking for new ways to innovate so that the nearest future does not make it obsolete. To be able to stay afloat in the future, the traditional financial system may have to work hand-in-hand with these fintech startups. Whatever it is, fintech startups are making their way to become an integral part of the future.

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