Unsplash / Clay Banks

Quick notes:

  • 81% of financial services customers view fintech tools as faster than traditional banking tools.
  • Mobile banking apps are becoming increasingly popular as an alternative to brick-and-mortar banks.
  • Lower fees and convenience are a couple of the reasons people are turning to fintech.

It’s happening now, and the handwriting is on the wall for banks who face potential extinction thanks to the emergence of financial technologies, or “fintech.”

Hyperbole? Maybe not.

While banks have had it their own way for centuries, the emergence of financial technology tools and services (think Venmo, Apple Pay, Vested, blockchain, and artificial intelligence, among myriad other examples) have banks reeling as customers, especially younger ones, eschew traditional financial institutions in favor of digital banking and finance platforms.

Whether you’re a banker or a banking customer, change is in the air in the banking sector. According to PWC, 73% of senior financial executives view this as one of the most “disruptive” forces threatening the existence of brick-and-mortar banks. In addition, only 53% of traditional banking customers believe their bank is “consumer-centric” compared to 83% of fintech banking users.

What is fintech?

By and large, financial technology (or “fintech”) is used to define different tech that attempts to improve and automate the distribution and use of financial services.

“Now fintech has a different contribution to financial activities,” says Norhanie Pangulima, content marketing executive at SIA Enterprises, a boutique marketing agency that helps business start-ups get up and running. “Fintech is appearing in different ways for financial consumers, including money orders, depositing money with your smartphone, bypassing a bank branch to apply for credit, raising money for a business start-up, or managing your expenses, usually without the assistance of a human being.”

Pangulima says consumers appear highly satisfied with new fintech banking tools, but there’s one characteristic they like best.

“We’re seeing that 81% of financial services customers view fintech tools as faster than traditional banking tools,” he says.

6 ways fintech is changing the traditional banking experience

In what ways, specifically, is fintech upsetting the old-school banking applecart? The list of fintech platforms and tools is growing, but these six “interrupters” are at the top of the list.

Via mobile banking. One big way fintech is disrupting the banking system is by going fully digital and abandoning the brick-and-mortar concept, financial experts say.

“A good example of the digital banking trends is financial service providers like Revolut and Nubank, based in Europe and Brazil respectively,” says Igor Mitic, cofounder of, a financial services and advice website. “They provide banking services completely over mobile apps, including the ability to pay for in-store purchases directly from your phone. Revolut also allows you to make investments in stock and crypto, and manage your entire investment portfolio from the app.”

Having the entire banking platform be mobile may pose new cybersecurity challenges, but it allows banks to save a lot of money by abandoning the brick-and-mortar model for good, Mitic says. “As these financial providers start to integrate blockchain into their systems, they will become even safer than using traditional banks.”

Via smaller fee policies. Banks need to take a look at their business model, which depends heavily on charging customers large fees to make domestic and international payments. Now, consumers have options and they’re already turning to them.

“The rise of blockchain and digital payments could severely damage this income stream for banks as customers don’t want to pay more for something they can get cheaper or for free elsewhere,” says Sukhi Jutla, author The FinTech Book and cofounder of Market Orders, a blockchain-based platform that services the retail jewelry industry.

Via convenience and faster turnaround times. Fintech is also increasingly using artificial intelligence and machine learning to help people with decisions when it comes to savings, Jutla says.

“Consumers can now choose financial products like pensions and mortgages … much faster than they can with traditional banks,” she says. “Fintech allows bank accounts to be opened in a matter of minutes compared to traditional banks which can still take up to several weeks to open basic banking accounts.”

In addition, many banks still don’t have decent online banking services or still require that customers visit a branch for identification and verification purposes. “With fintech, this all can be done at home with the use of facial recognition technology on your mobile phone,” Jutla adds.

Via blockchain technologies. Traditional banking will be substantially replaced by blockchain in the future, says Rohan Hall, cofounder of Vottun, a blockchain technology company based in Los Angeles.

“One of the key values that blockchain provides that did not exist before is the ability to instantly transfer money and other financial assets,” he says. “For example, I moved from Spain back to California a couple of years ago. It took more than a week for a transfer from my bank in Spain to reach my bank account in California. I called both banks during the transfer process and neither knew where my money was or when it would arrive. They knew there were one or more intermediaries in the middle of the process but did not know who the intermediary was. Plus, when the funds finally arrived there were huge fees taken from my transferred funds.”

Bitcoin can do the same transfer in minutes and other blockchain platforms like Ripple are starting to do these kinds of transfers in seconds. “That means the instant transfer of financial value, with no intermediary, and no minimum funds and no fees,” he adds.

Via social media channels. Look for the Facebook Libra (a new global digital payment platform) project to be approved by the U.S. Securities and Exchange Commission and other global governments. “If Facebook goes live then cash micropayments to more than two billion people all over the world, including many of the so-called ‘unbanked’ will become an instant reality — and banks will be unable to compete,” says Hall. “Ultimately, Libra will be the largest global bank in the world.”

Via small business lending. One area where fintech companies are both challenging and partnering with banks is in the area of small business lending.

“Small business lending in the U.S. alone is estimated to be a nearly $200 billion industry,” says Priyanka Prakash, a business finance specialist with Fundera, a small business fintech provider. “Right now, banks are only receiving a small fraction of that — small business owners with established companies and strong credit scores.”

Prakash says there’s a big “unbankable” market of small business owners that fintech companies are catering to.

“Most banks lack the appetite to take on the risk that this market represents,” she says. “Fintech companies are partnering with banks on this front, with banks sending their more risky borrower leads to fintech business lenders. This isn’t so much of a threat to banks as a lost opportunity and a limit on their future growth. It also shows the advantages of fintech lenders, who can work more dynamically and quickly than a bank to underwrite and fund small business loans.”

A new age — and new choices — for financial consumers

Banks are no longer enjoying the immunity their reputations and size previously gave them, says Jutla.

“The industry is no longer dominated by monopolies,” she says. “Instead, fintech has produced new competitors that enable banking consumers, for the first time, to actively choose banks on their terms.”

“Simultaneously, banks are falling out of favor as they are unable to stay current with changing technologies such as blockchain, cryptocurrencies, and artificial intelligence wealth managers.”