Historically, electronic payments solutions have been delivered by most banks as a secondary offering – often living in the bowels of the bank’s basements or tucked away into treasury as a secondary offering. Frankly, the early evolution of the payments landscape caused such posturing. Electronic payments and deposits were miniscule to that of checks and cash – and as the interchange schedule grew more complex, and terminals became small computers – most banks lacked the internal expertise, and material interest in maintaining a competitive presence in this industry.
The competitive landscape for banks has changed – FinTechs and acquirers are now competing with banks, offering their deposit, lending, and fee income solutions as complementary to the payment vehicle. Banks are losing potential market-share to FinTech and have to adapt with this technology to augment traditional offerings and meet the market where it is now and where it is going.
FinTech has evolved greatly in the past 3-5 years and there will likely be more changes in this 5-year period than in the past 20. Many banks have stayed focused on core offerings and resisted spending significant energy evolving payments and other FinTech offerings during this change.
That’s a problem, considering FinTech is swooping in and revolutionizing the payments business through easy to consume vertical technology bundles, simplified lending models, business management software that create business efficiencies, rewards and analytics data, and facilitator models that sidestep the traditional, cumbersome on-boarding to allow local businesses like VanDykes Bed and Bar to accept payments with complimentary tools that help the business compete in minutes.
FinTechs are now offering small business loans and deposit accounts to clients, which is an entry way and direct threat to banking’s biggest revenue source – lending.
Banks, some of who see market share decreasing, are able to benefit greatly from FinTech. Fintech organizations can compliment banks by providing faster, simpler, and more effective electronic payments solutions, vertically focused business management software, payroll services, lending alternatives, rewards and reputation management, and data insights that can materially impact a small business’ ability to grow.
Building a localized, strong payments product with the right mix of technology, transparency, and high-touch service will position the banks that embrace these partnerships to dominate the landscape.
They are most impactful together. It’s time to get to work.
