In 10 years' time, fintechs won't be replacing banks

Libeo COO and co-founder Jérémy Attuil examines fintechs and banks and how they can coexist, thrive, and stimulate innovation in the financial industry.
In 10 years' time, fintechs won't be replacing banks

In recent months, there has been a great deal of market speculation about the resilience of fintechs, their competitiveness in the face of banks, and their ability to stay the course or even survive in turbulent times. This debate always seems to resurface in times of crisis.

But in this power play, it's important to understand that the financial market is not a zero-sum game. Innovation does not necessarily mean the disappearance of existing players. On the contrary, the rise of fintechs has stimulated innovation among banks, prompting them to evolve their services and adopt the latest technologies. Not least by forging partnerships with the most innovative fintechs.

Fintechs and banks can coexist and thrive together, for better or for worse. Certainly, the former have undoubtedly asserted their presence over the past three years, with record investments, hypergrowth, an unprecedented level of agility and innovation; a total disruption of existing standards, in the service of the user experience. 

In particular, this has enabled embedded finance, which consists of providing financial functionalities (payments, loans, insurance, etc.) directly within existing platforms or applications, rather than through financial entities such as banks or insurance companies, to be present today in most everyday tools, for both individuals and businesses.
For example, payment services, one of the banks' core functions, have undergone a metamorphosis to transform the experience: individuals or businesses can pay themselves without going through their bank, purchases on e-commerce sites can be made by transfer without going through their bank interface again, or financing is instantly accessible to make online purchases or pay supplier invoices.

This transformation has also prompted banks to move into the field of agility and innovation. Today, the balance of power has shifted. Funding for start-ups is on the decline, paving the way for a top-down selection of the best fintechs, technologically and service-wise capable of weathering difficult times. 

The banking sector is probably well aware of the benefits that synergies with fintechs could bring, and that each party can enrich the other and provide an exceptional complementary offering.

Banks must therefore use their solidity to seize the opportunity to further strengthen the market. How can they do this? By continuing to invest in the best fintechs through commercial and technological partnerships, fund-raising and buyouts.

These collaborations can give banks access to cutting-edge technologies and offer new services to their customers, while providing fintechs with the resources they need to develop their products. They can also use their influence to foster a virtuous regulatory environment, benefiting banks, fintechs and consumers alike.

Now it's the startups' turn to adapt. A breath of fresh air for a new generation of ambitious companies determined to change the rules of the game. Will tech make the grade? 

Here are the ones you won't want to miss: 

Don't settle for simply improving the status quo: fintechs need to focus on radical rather than incremental innovation. It's essential to prove that the changes made are significant revolutions, capable of changing the financial landscape in a major way.

Don't miss the generative AI turn: the new capabilities enabled by machine learning algorithms has the potential to transform the financial landscape. This represents an opportunity for both fintechs and banks to redefine their service offerings, improve operational efficiency and create new value channels for their customers. Its disruptive role in the financial sector has only just begun. With capabilities ranging from personalizing financial services to automating complex tasks, generative AI has the potential to radically change the way we think about and interact with financial services.

Doing more with less: With less liquidity, efficiency and frugality are key to navigating these turbulent times.  We need to manage cash effectively, minimize non-essential spending, and invest strategically in areas that will generate the most value. 

Capitalize on the community: The French startup ecosystem is strong, but it's in adversity that its true value is revealed. In these uncertain times, mutual support and collaboration are essential. Fintechs, in particular, can strengthen themselves by sharing resources, best practices and forming strategic alliances. Investors, for their part, must remain convinced that we are only at the dawn of profound revolutions, which will only come about with the long-term support of the best players in the ecosystem.

In the great fintech versus banking match, there is no winner. On the contrary, the convergence of the two offers a promising path for the future of the financial industry. Fintechs bring agility and innovation, while banks offer stability and confidence. By navigating financial challenges carefully, fintechs will endure and prosper. Banks, meanwhile, can leverage their strength to drive the market forward by investing in innovation.

The union of fintechs and banks could well lead to the next major revolution in the financial sector. The future will be full of opportunity and innovation, and it will be fascinating to watch this evolving balance.

Lead image: Tim Evans

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