What traditional banks must do to withstand Fintech competitionWith UK fintechs receiving billions in investment in 2020 despite Brexit and Covid-19 uncertainty, what can traditional banks do to withstand competition?
During the pandemic, there has been a shift among customers from traditional banks to Fintech competitors, meaning that they will need to react to not be left behind.
Recent research from London & Partners and Dealroom.co has found that Fintechs in London received a total of $3.6 billion in investment between January and September 2020, managing to weather setbacks relating to Brexit and Covid-19. This ranks the UK capital in second place for Fintech investment, behind San Francisco (5.1 billion).
The same study also revealed London to be ranked first globally for Fintech deals, with the city seeing 169 so far this year, 62 more than second-placed San Francisco.
In addition, further data from Beauhurst tells of 95% of UK Fintechs now being beyond the worst of the pandemic, and with Tech Nation launching its Fintech Pledge last month to provide a further boost to the sector, the industry looks set to continue thriving.
How has the Covid-19 pandemic put an end to ‘banking as usual’?
“Uncertainty surrounding Brexit and Covid-19 hasn’t dented investor confidence in Fintech,” said Kwiatkowski. “Instead, given the type of disruption we are seeing, it seems to have accelerated the shift from traditional banks to fintech competitors. In fact, since the pandemic started, the number of customers using digital banking services or apps has grown by 11%. This adds to an existing 58% of customers that were already using digital banking.
“The momentum fintech banks are gaining could spell trouble for traditional banks. Customers that have grown used to digital banking may be resistant to returning to the old normal. For the traditional banks, it is imperative that they invest in their digital capabilities. Improvements to online banking, apps and online customer service are now crucial if they want to stave off the competition.
“Traditional banks must now recognise that sticking to their old ways is no longer an option. In the world of banking, tradition has moved on. Convenience, ease of use and the ability to control your finances at the tap of a screen: this is what customers now consider to be normal.”