COVID and Globally Lower Liquidity are Pushing Fintechs Inside Our Homes

The pandemic era has dramatically changed our perceptions surrounding services. Stay at home policies and plaque-style restrictions forced both institutions and citizens to rethink digital services, including distance banking.

The idea of expanding internet banking services was highly welcomed by the banks themselves as it allowed them to lower operational costs and provide better, quicker, and client friendly services at their fingertips at any time and from any place.

The year 2022 become even tougher for the banks as central bankers across the globe began to tighten monetary policies, borrowing became very expensive, soaring consumer prices are leaving people with less money to save, while communal services are eating more and more of the regular income, commented Martin Marsovsky, chief manager of Finmex Academy.

European banks are being forced to migrate to digital distribution models and this is where internet banking is seen to be a logical solution to most of the problems.

But all these sweet dreams were already outstripped by numerous small and hungry fintech newbies that are ripping off the financial sector.

Fintechs are on the march

Now not only banks, but fintech companies and new breeds of banking services are also among the major players in the banking sector which are dominating consumer finance segment. They are mostly active in payments, wealth management technologies, online trading, and insurance.

Most of the growth-hungry fintechs are expanding beyond national borders to offer services both on international and multinational levels as they are not very bound by peculiarities of local regulations. Local banks usually partner with promising decacorns so that they can retain some of their clients.

Some of the large banks are on the pursuit to acquire such fintechs but those are mostly large European or U.K. financial institutions. Others are choosing the go down the path of cooperating or partnering with this financial turbo-charged fintech community.

Most of the fintech ventures are focused on payments, consumer finance, digital banking, wealthtech, online trading, data analytics, and insurance technologies.

Are Banks being left behind?

Banks are deploying their digital strategies in a slightly different manner as they are constrained by regulations and bound by traditional servicing. Most of their efforts are focused on the distribution of digital products. Some large banks are expanding cloud-based banking solutions but most other services, including fast remittances, mortgage services, wealth funds, ESG solutions, complimentary customer offerings diversification and customer retention, including customer acquisition cost control, are now being delivered by third party fintechs.

But fintechs are highly dependent on capital as they are seeking out banks to become their major partners. Some fintechs are being dumped by the cost-cutting policies of banks and some fell victims to the tighter financial regulations in Europe.

So, banks are already on their digital transformation journey and may inevitably face strong competition once fintechs establish their strong independent financial position. Only biased harm caused by financial regulations could stop their cross-border expansion. Geographic limitations are still one of the hurdles that fintechs face.

The Czech Republic is not on the verge of fintech revolution, but its banking system is being challenged by neo banks that are shaping the global banking landscape.

Some Czech fintech firms like 4Trans are successfully attracting venture capital. But Czechia is certainly not a hot spot for venture capital. So, most of the trends in fintech are likely to be imported by large international financial institutions or foisted by Amazon-style fintech monsters.

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