Banks And Fintech: How Banking Sector Deals With Threat Of Disruption?

Banks And Fintech: How Banking Sector Deals With Threat Of Disruption?

Fintech acronym of Finacial Technology is the modern movement in the finance sector. It will incorporate financial services to fulfill the demand of people with the means of the latest phenomenon. Fintech app development is the technology that introduces debit cards, credit cards, internet banking, and other contactless payment technology.

Facts about Fintech App Development

Finally for the last few decades it has taken over the entire finance sector.  It has divided the entire procedure into three classifications- regulation, customers and technology. Even it has helped Fintech 2.0 to take up the space by offering lucrative banking ideas. Read on this blog to know how Fintech imposes a threat of disruption over banking sectors. 

Flight or Fight

Disruptive innovation greatly affects ability, motivation and response of the incumbents. Banks have the ability to control the disruptive nature of Fintech. But the true fact is their manpower and wealth is either passive or dismissive. This is the prime reason robo investing and Bitcoin have been developed by Fintech app developers for filling up the space.

On the other hand, being passive banking sectors get collaborated with Fintech with the help of direct equity investing and soft-touch accelerators. This will not only keep the system pure but also give an outsourced innovative form. Therefore flight or fight is needed to adopt by the banks to respond to the Fintech services properly by increasing their motivation. 

  • Flight in Fintech App Development

Prior to become a retail, commercial and full conglomerate banks were quite good and responsible at their functions and operations. Their practices may sound good but there is an irregularity in the occurrences of every function. But finally banks have acknowledged their inevitability of offering seamless financial services. So they make use of certain infrastructures to improve their services. But finally every one of them gets shut by Fintech.

But falling down gradually from a conglomerate is really hard to accept. In such case if success can be attained for the unbundling financial services then it will be there in the list of generalist systems. But Fintech spins of the ROI bankers and consumer banks in their traditional model with a touch modernism so that they can perform at their best and sustain via specialized services.     

  • Fight in Fintech App Development

When it comes to combating the industry, norms get completely ripped off by adapting something different. Of course, the services of banks are confused and old. The combination of institutionalized and manual procedures was suitable for pre-internet age to build up the status. 

That too has faded over time due to the high demand of people in this high technological era. As banks have the knowledge of these historical procedures they can easily gain the benefits of Fintech services. These will only improve the efficiency of the banks in better pricing structure.

Rather adopting the unbundling structure, it is better to hire the newest infrastructural form as it is fast, transparent and malleable resulting in generating in good value. Their endless technological process and financial resources every bank can attain the level of success. Initially, it may be seemed as risky due to the consumer and cost. But once the challenge is accepted it will be fruitful in the long run.

The investment goals reassessment in Fintech startups

To response to the Fintech services banks have smartly adapted to the aspect of the outsourced innovation. If the stats are revealed then it can be seen that only a few percentages of the banks are putting maximum effort to design and develop their own Fintech. It helps them to offer fully personalized and customized solution to the customers.

As a result, it will somehow impact the ROI and profit margin at the same time. This strategy is called overly-passive or “Machiavellian touch of genius”. It is simply illogical that a bank with much wealth and manpower has to rely on the booming startup for driving the industrial innovation. It is so; because varied accelerators can be set up easily.

Moreover the insight of the startup can be improved by operating the internally-lead, confirmation bias and PR karma involved Fintech accelerator by the banks.      

Change in the Cross-subsidization cost culture

The prime focus of the bank is the annual budgeting procedure on the basis of the revenue targets. Accordingly costs will be divided and every investment is included in it! Although transparency is brought by the egalitarian cost accounting process, the high expense puts more pressure on the short-term goals. This refers to the goals which target to be the long-term planning expense at the end of the year.

Cross-subsidization can be noticed in some services and products as well especially in those which have high ROI. This is the prime reason that banks provide alluring offers to the existing customers so that they will benefit them in return in lucrative way as well. Banks have several specific functions which are performed by designated teams.

As every part possesses their respective profit targets and cost structures they need its share. It is expected that cost economies kick the existed synergies in large banks. It is actually the rollout to use graduate training program and specific software in every sector for the norm “one size fits all”. However, every sector performs separate job and so they need different programming software.  

But by venturing with the financing and Fintech this critical issue can be solved! As they make annual budget they perform hardly to meet the number. Then they become concern related to any other long-term plan. Ruthless approach of the Fintech developed by Fintech app Development Company must be taken for cost-sharing and budgeting procedure for this egalitarian one.

Only treasury will be shared other functions. Rather than pro-rata costs sharing on the basis of headcount or notional trade cost will be addressed along with complexity and effort for several activities.

Zero-based budgeting also helps in reducing the wastage and cost-creep of traditional way of superfluous money spending ensuring that budget is not affected. Long term budgeting is also reliable for innovation and sustainable growth in the long run.  

Compensation alignment in the booming areas

Due to different banking scandals, banks are greatly affected and largest technology organizations are taking this into consideration. Although stock offers are included often in banking compensation yet it is regarded that in technical industry its showcases great upside. However it can be rectified with the help of compelling bonus plan and increase in the targeted wage.

Moreover, long-term budgeting and decentralized teams can be the quality reason of leaving by talented employees due to the intellectual rigors of the IT Company.  Apart from this, banks should also put emphasize on the drastic shifting of the roles of certain staffs due in the present finance ecosystem.

As technology is always being the master in offering services to banks and banking it is recognized as an important component.  Development and coding skills are primary need in the tech company as these elements play a vital role in business design. On the other hand, banks consider it as supportive operation to support each and every banking role separately.

But in the end it possesses no physical proximity with the functions of revenue generation.  The innovation can be fostered in much better way. To achieve this, revenue-generating team must integrate the critical support function in the front-end operation. Basically core banking is the commodity service that imposes the strength of essential aspects like settlement reliability, software employed, execution speed, technology, connection and deal-making ability.

If the former aspects can be compensated with the team performance that it will definitely bring the innovative changes to the rest of the banking parts.  

These are the ways in which banking sector is totally disrupted by Fintech. All you have to do is to implement the relevant services of Fintech rather hiring them in full packages. It can be done so by taking help from any Fintech company.

Induji Tech is the leading name of such a company that has a specific team of Fintech expert providing customized solution according to the needs of your banks.

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