Fintechs Are Taking Over! Where Does That Leave Incumbent Banks?

Updated: Jan 29, 2020

NerdWallet, Credit Karma, Venmo, Stripe, Wealthfront and Stash are all fintechs that have revolutionized every facet of the financial industry, from loans to credit scores to payment transfers to personal investment, in just the last decade. Chances are you have heard of all of them, and many others. What does this mean for incumbent banks that have built their hegemony offering these services?

It means they need to change their angle. More specifically, establishment banks have two options to maintain their position in the industry and keep up with the innovation: compete with the innovators, or collaborate with them.

Fintechs have been able to attract and adjust to the millennial market through the use of AI and machine learning enabled services, as well as extremely impressive UI and UX on their various platforms. According to Forbes, “Millennials value transparency as well as convenience. They essentially demand to have a personalized product or service at their fingertips wherever and whenever they need it.”

One pillar of customer retention strategies for incumbent banks has been to foster generational loyalty: young adults have primarily used the bank their parents use. They become customers as kids, setting up their first savings and checking accounts, maybe even taking out their first loan.

However, this pattern is disappearing as the new generation has a vast array of individualized financial services available to them for download on their smartphone. More than ever, people are using different providers for different services, instead of one all-encompassing financial institution.

57% of Americans believe that in the next couple of decades, financial institutions as we know them will no longer exist.

There is, however, opportunity for big banks to accomplish two goals at once: maintain industry power and compete with the agile, user-friendly, AI enabled fintech companies, boosting consumer investment. By collaborating and partnering with fintechs, financial institutions can participate in the changing industry by appealing to the new market of consumers and offering them a brand new product that is custom-tailored to their values and affiliations.

Machine learning, AI, decentralization of services, personalization, and technological integration are not trends incumbent banks should run from. If they want to maintain their position in the rapidly evolving industry, they should embrace them, as there are already fintechs lined up to help them do so.

I am CPO and Co-Founder of Cred. Cred is a disruptive WealthTech startup aimed at enabling financial advisors and institutions to truly personalize each of their retail clients' portfolios, based on their unique backgrounds, financial situations and preferences. This is the way investing will work in our generation, and we’re excited to be pioneers on this journey.

Feel free to contact me at, and find us on Facebook and LinkedIn!

A special thanks to Olivia Johnson for preparing this article!

#fintech #personalfinance #innovation #banking #investment

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