FINANCIAL technology (Fintech) is really catching on, and last week, Singapore just hosted the biggest Fintech convention in the world. Amid the expected rah-rah, there were a fair number of banking executives who were walking around with shark-eyes.

Despite their “we should look for venues to work together” speeches, I doubt anyone was fooled as to why the banks were really there: they were scoping out the competition. They were likely working out whether they were going to kill it, or kill it and then eat it afterwards. Here are the Fintech ideas that banks are already “stealing”:

The relationship between banks and Fintech

The relationship between banks and Fintech is hard to pinpoint as “adversarial” or “co-operative”.

On the one hand, some forms of Fintech – such as credit card comparison sites and home loan comparison sites – are mostly on the side of the banks. They make most of their money by directing the customers to the banks (more on this below). The banks, of course, tolerate them because they bring in customers.

On the other hand, some forms of Fintech threaten to replace entire segments of the banking business. The P2P lending websites, such as Capital Match and MoolahSense, could well replace banks in the area of small business loans. Most notably, Fintech companies such as Nutmeg have begun to pose a serious threat to the notion of private banking, by replacing the traditional relationship officer or private banker with online wealth management.

Recent developments though, suggest that big banks are taking a third alternative.

Many Fintech companies just fill in the gaps

The company that embodies the Fintech threat to banks right now is BankSimple, an American-based, web-only bank. It does everything your bank can do, but it exists in a purely virtual space. CEO of BankSimple, Joshua Reich, uttered some famous words about challenging banks, right at the launch of Bank Simple: “By not sucking, we will win.”

Reich is an advocate of the belief that banks are too big and complicated, and just by “not sucking”, Fintech firms can easily beat their more traditional counterparts. In essence, a lot of what makes Fintech work is that they identify weaknesses in the banking system – be it long processing times, pushy bankers, tedious loan applications, and so forth – and then fix it.

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