Before Bitcoin, there was Fintech and banks are fighting on both ends to survive

Before there was bitcoin (BTC-USD), there was fintech and if banks are wrong to think they are winning against both.

In 2017, I was asked if Bitcoin posed a threat to the banking system. My response was that if banks adopt Bitcoin as a currency (which it is), it will be a win-win situation for both.

At that time, Bitcoin had only recently risen from a few dollars to a few thousand dollars. That was a huge gain for a currency that was and still is widely misunderstood and underestimated.

Nonetheless, as previously stated, there was fintech prior to Bitcoin. Banks are attempting to do what fintech providers are supposed to do, one of which is to provide financial services. They began digital banking in order to outperform the fintech startups.

But now something is happening that leads me to believe the banks were incorrect in their approach to fintech. And they are going to face a big problem soon.

According to Forbes, fintech continues to have a huge opportunity to drive financial inclusion and have impact on consumers’ day to day lives.

What does that mean? Banks too are pushing for greater inclusion though many people are still cut out of their system.

I remember the first time I got an ATM card from the State Bank in Mauritius. Something went wrong with the pin at the ATM machine and it ate my card.

I never recovered it and lost the $50 dollars I had in it. It told me one thing, and that was in 1988, Banks do not make it easy for you to draw your money. If it is easy, they charge you for it. In Malaysia, they will charge RM1.00 per withdrawals if you use your ATM card.

I use to put my card in the ATM machine on a daily basis. That ate a lot of my money. The price to pay for technological advances in the banking system?

Yet, in countries like Cambodia for example, neobanks are growing. Pi Pay, Clik and Wing that are causing a lot of disruption in Cambodia.

The FinTech industry is still in its infancy but the sector is steadily expanding as a result of rapid adoption of digital payments and a large unbanked population.

Indeed, the presence of a number of FinTech start-ups has compelled Cambodia’s banking and financial sector to expand their existing services.

Innovate or die?

The majority of banks are not innovating quickly enough to keep up with the demand for better rates and terms.

Experts believe that innovation poses a threat to some banks that are working hard to maintain their market share and position.

This, they argue, is not always in the best interests of citizens because banks that do not innovate do not provide better options, rates, and terms to their customers.

Similarly, neobanks or fintech providers are bound to provide better products to consumers in order to manage their financial well-being and scale.

When the benefits to citizens are demonstrated, these products will change the game in these markets and will have or earn the support of the people and regulators.

What to expect?

We believe banks will fight back to survive this onslaught. They will try to innovate, but the game has changed and as long as the banks depends largely on the Central Banks to decide on their rates (which limits the game for them), they will lose market share to disruptors.

And among these disruptors are cryptocurrencies. Banks are squeezed between Fintech and Cryptos.