Fintech Disruption in the Payments Landscape

The advent of technology and the urge for everything to be frictionless, quick, easy, simple is proving challenging for banks to adapt. Banks are able to improve their offering and can do this through improving tech, widening product range or by partnering with Fintechs. They can also provide banking services to Fintechs who are seeking a banking partner to provide the payment infrastructure to them. This would not only serve a domestic base of clients but would also serve Fintechs from the world that require inward support for their payment flows or indeed access to domestic payment schemes that they don’t have from their home bank (whichever state they are from). Regulation for a payment company or an e-money institution is much lighter and different to a bank. The biggest hurdle is risk and compliance, especially when there is a difference in product offering between the Fintech and the Bank.

Yes. However, this comes with a caveat. Banks will have to adapt to retain margins, balance sheets and customers – especially with regard to payments and pricing will ultimately come down, this will result in a fairer deal for the majority of consumers.

We will continue to see a number of new entrants that continue to use the existing infrastructure and the rails provided by Banks and will make losses as they try to scale to gain consumers. This will happen until the sector matures when we will see an exit of angel/VC funding, which will lead to consolidation with fintechs. At this point any established and dominant FinTech’s will seek to increase earnings by increasing margins or fees and monetise the consumer base that they have won over the past few years. The OCC is looking at offering a Fintech Trust Charter, which would allow one licence for all states in the US, indeed a federal licence, and would revolutionise access to the payment infrastructure across the United States. It replaces the current state by state system which is expensive to maintain and to enter and is a true barrier to revolutionising the US market.