Fintech’s and traditional Banks: Navigating the future of financial services
The banking and financial sector are rapidly evolving, and South Africa has jumped straight into the FinTech curve growing the sector exponentially in the last decade.
The rise of FinTech companies has prompted widespread debate and discussion about the potential for them to take market share away from traditional banks.
Johan Gellatly, a thought leader in the industry with over 30 years of experience, offers insights into this debate, shedding light on the advantages FinTech’s bring, the enduring strengths of traditional banks, and the crucial aspects of trust, security, and regulatory compliance.
“Fintech’s cannot fully replace traditional banks” Johan says, “Fintech companies offer innovative solutions that challenge certain traditional banking models in niche verticals where there is evidence of high consumer engagement and transactional friction.”
Fintech’s with streamlined processes and digital-first approaches, provide agility and efficiency, often lacking in certain processes of traditional banks. However, Gellatly cautions against viewing FinTech’s as direct competition to traditional banks at all.
While Fintech’s excel in certain niche areas, such as providing tailored services and quicker responses, very few Fintech’s can match the breadth and depth of services offered by traditional banks. “Traditional banks are key to the success of Fintech’s and won’t disappear.”
“We require traditional banks to evolve, innovate and grow and partner with Fintech’s!” Johan reiterates.
There are various strengths that traditional banks hold over Fintech’s and despite the disruptions caused by Fintech’s, traditional banks maintain dominance in crucial areas like corporate and investment banking and their physical geographical reach to service larger enterprises will always be a requirement.
Their extensive experience and resources make them indispensable for large enterprises requiring substantial investment capital to achieve domestic and global reach.
Moreover, traditional banks possess the expertise to serve a wide range of customers Fintech’s predominantly service a range of niche needs of Tier 2 to 4 enterprises to SMME’s in a similar way that traditional banks operate, however Fintech’s will always require to be bolstered by the strengths banks have to process large volumes of transactions.
Trust and security are paramount in the financial industry. “Altron is a listed entity, and we comply with all the requirements of the Personal of Protection Information Act and more” Johan says.
“We deal with large payment transaction volumes so there is a high level of security and trust involved to protect all the participants in a secure payment transaction.”
While both Fintechs and traditional banks face vulnerabilities, traditional banks have an edge due to their extensive experience in building resilience against cyber threats.
Consumers evaluating the use of Fintech solutions must conduct thorough research to ensure adequate security measures are in place to protect them against the bad actors in the industry.
“As a Fintech we make it our business to ensure compliance with the required governing bodies. We must be payment card industry certified, Euro VISA and Mastercard certified just to name a few apart from being compliant to the various regulatory bodies” Johan notes.
“So, we are very focused on compliance, should we be found not to be, we won’t have a business. We get audited every year by independent auditors by the various bodies that we participate with.”
“Our business can’t exist without compliance and provides peace of mind to our customers when they contract with us for the use of our services that compliance is taken care of by us.”
Regulatory compliance presents resource challenges for both traditional banks and Fintech start-ups. Regulators play a crucial role in ensuring consumer protection and financial stability in the national payment system.
While adapting to accommodate the rapid pace of Fintech innovation, regulators must maintain stringent standards to safeguard the integrity of the national financial payment system.
Compliance is non-negotiable for both traditional banks and FinTech’s, with audits and certifications essential for building trust with customers and consumers when they make use of the national payment system.
Collaboration between traditional banks and Fintech companies is increasing. For Fintech’s like Altron FinTech, partnerships with traditional banks are vital to leverage off their infrastructure and regulatory compliance.
By offering agnostic platforms and facilitating choice for consumers, Fintech’s enhance the financial ecosystem while leveraging the stability and resources offered by traditional banks.
One such collaboration is the deployment of our high resilience multi-acquiring banking solution, a partnership with multiple traditional banks, that Altron FinTech has experienced as a massively successful partnership for both its customers and consumers.
Johan Gellatly emphasizes the importance to have perspective and drive financial inclusion in the Fintech landscape.
While striving to innovate, Fintech’s must not lose sight of the sizable population lacking access to cost friendly banking services.
Learning from successful examples like Capitec Bank, which prioritizes financial inclusion, Fintech’s can assist to bridge the transitioning gap from cash transactions to formal electronic banking, ensuring broader and deeper accessibility and to engender trust in the national financial payment system.
While Fintech’s can introduce disruptive innovation and agility to the financial services sector, traditional banks remain pillars of stability and expertise.
Collaboration between the two is essential for driving industry progress while addressing the diverse needs of consumers.
Trust, security, and regulatory compliance will continue to shape the evolution of Fintech’s and traditional banks, ensuring a robust and inclusive financial ecosystem.
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