The global fintech market attracted $5.4 billion in investments during the first quarter of 2016, which represents a 67% increase over the same period a year ago, according to Accenture. While start-ups have attracted the lion’s share of investment, many large commercial and investment banks are determined not to be left behind by investing in their own fintech ventures or partnering with newer start-ups in the space.
Credit Cards and Loans
Citibank’s mobile app enables users to dispute credit card charges for a variety of different reasons, such as damaged items or duplicate charges, without having to talk to a representative. In addition, users can request credit limit increases, view their recurring charges, and enroll in paperless statements through the mobile app. These features help Citi compete against fintech start-ups like BillGuard looking to solve the same problems.
WSECU, a credit union in Washington State, lets members apply for short-term loans through its mobile app. In just a few taps, members can get a $50 to $700 loan with a 60-day term or a $701 to $4,000 loan with a nine to 36-month term. The app helps the bank compete with peer-to-peer lenders providing a similar user experience, including SoFi and Upstart, that have attracted a growing number of consumers looking for better loan rates.
Checking and Savings
BBVA Compass partnered with Simple to change the way that users interact with their checking and savings accounts. Using its Safe-to-Spend® technology, the debit card and mobile app enable users to spend spontaneously without derailing a budget and visualize their spending. The company estimates that its users save 10% of their annual income each year compared to a -2% savings rate for the average American under the age of 35.
Bank of America hopes to harness the power of artificial intelligence to power its chatbot, called Erica, that aims to help consumers develop better money habits. The virtual assistance will be fully integrated into the bank’s mobile app by late 2017 and should help the bank compete with fintech start-ups like Abe.ai which are targeting the same problems. These chatbots are poised to become even more popular with the opening of various chat platforms.
Santander recently launched a business-only mobile app that enables clients to deposit up to $15,000 per day without visiting a branch. In addition, customers can transfer funds between work and personal accounts without any extra efforts. These features help the bank become more business-friendly as payment processing start-ups contemplate their own set of bank-like features designed to help businesses manage their cash flow.
According to a Javelin Strategy & Research survey, more than half of owners of small to mid-sized businesses indicated that they would value an online service that would provide a consolidated view of company finances, enable them to invoice customers, monitor payments, manage cash flow, pay suppliers, process payroll and receive tax help. These areas could be the next focal point for small business fintech innovations.
The Bottom Line
Fintech startups continue to attract significant investment capital, but big banks have acted to defend their ground. In some cases, these companies have introduced cutting-edge features into their own products, such as Citi’s credit card disputes. In other cases, companies have partnered with fintech firms to capitalize on their agility, as was the case with BBVA Compass and Simple in the online banking space.
Banks that ignore fintech risk becoming “dumb pipes” in the financial industry as their services are commoditized and high-margin competitors are built atop them. While there’s a limit to the amount of innovation that established banks can commit to – due to extensive regulations on the industry – partnerships, acquisitions and investments will continue to drive the market for fintech startups as the best ideas are borrowed by banks.
Feel free to contact E-SPIN for FinTech infrastructure availability and performance monitoring, application security monitoring, and protection solution.