The banking industry is evolving at an increasing pace. For the past few years, banks and financial organizations have gone through drastic changes. Recently financial institutions and FinTech startups initiated their cooperation that will bring them to some economic growth. At the same time, dozens of Tech companies are offering various financial solutions that are helping the financial industry to grow. Let’s discover difference between FinTech and TechFin companies.

Giant financial corporations implement an innovative approach and become customer-oriented companies, with modern technologies in use. At the same time, we have traditional institutions, that obtain enough resources and financing. According to the World FinTech Report 2019, an open ecosystem is setting the course for the future of the financial industry, as well as a new partnership between classical banks and FinTech startups.

«The traditional bank must progressively move from a position of ‘universal bank’ to a position of ‘universal partner’ to support customers beyond strictly banking products. Indeed, financial services are at the crossroads of customer journeys. This is an orientation towards a more useful but less visible bank.»
Laurent Darmon
CEO, La Fabrique by Crédit Agricole

The bottom line is the difference between FinTech and TechFin. Between a company based on financial technology and a company that uses technology in its financial activities. The traditional bank is a TechFin company: it sees technology and tries to fit it into existing structures and processes

FinTech Companies – create new digital processes that, in the analog world, function partially or not at all. TechFin companies – digitize processes in accordance with the capabilities of technology, that can function both in the analog world and in the digital one. The traditional bank, which acquired the application, simply added it to its old systems.

A digital bank is being built from scratch and actively uses modern technologies. It functions in a completely different way. Perhaps the best example would be a large bank. A bank like this has branches, staff, history. It notices a new technology and tries to integrate it into its complex structure. A digital startup bank starts from scratch and poses the question differently: «How do we rebuild our financial services based on new technologies?»

Difference between FinTech and TechFin

We need to consider the difference between a company based on financial technology and a company that uses technology in its financial activities.

A traditional bank is a TechFin company: it sees technology and tries to fit it into existing structures and processes. A startup is a FinTech company: takes technology and on its basis creates products for financial markets and structures. The first continues to focus on a physically distributed organization, that exists in the form of many departments, where employees work. At the same time is trying to insert all this technology above all the existing processes.

The second starts with the digital distribution of data on the Internet. Then determines whether it needs offices and employees for work. This is a completely different approach to the problem, and it is inaccessible to most banks since they don’t have anyone from their management, who could make such bold decisions.

So here we have :

As a result, it turns out that FinTech companies think on the basis of existing technologies, revises the structure, and build both – old financial services and new ones. And alongside create disruptive innovations.

TechFin companies think the opposite, how can technology be used in an existing company and service structure. During this process, they create supporting innovations.

In conclusion, both FinTech and TechFin institutions make sure to satisfy the overall winner – the customer. Overall it doesn’t matter what customer chooses – a more traditional or innovative approach. But we c cannot deny the fact the industry keeps changing and most likely technology implementation will be inevitable. Artecha team will gladly let you know about more details.

Today we live in a global era when the banking system is already starting to fail. Banks are local, and the network is global. This requires a certain digital step from the banking industry. Digitalization means rethinking the bank in the realities of the Internet era. It is changing the business model and corporate culture of the bank, which are now built on the basis of digital platforms.

Think about this for a moment

Since mainly bankers are at the head of banks, this could be a problem for bank innovation. The top management of most banks does not have an engineer in their team. This has to be a person with a digital technology background. A person in charge of digital on-boarding. Therefore, the leadership of such banks believes that digitalization is a project. In each business area, some digital project is created, a leader is assigned and the task of the digital reform is set. This person gathers a team, receives a budget, completes his project, and everything returns back to normal. This has nothing to do with real digitalization and is nothing more than patching holes.

Re-build financial services

Digitalization requires a total rethinking of the bank in the realities of the Internet era. It is changing the business model and corporate culture of the bank, which are now built based on digital platforms. It requires re-imagining how banks will provide high-tech financial services. Bankers see the situation exactly the opposite. They ponder how to apply technology to an existing financial services structure. Why is that? Because bank executives are knowledgeable about risks, government regulations, compliance, accounting, postings, and money. What they don’t understand is technology and the future of banking technology.

Technology expertise

How can a bank be re-built technologically, if no one is aware of technology from the top management? This is a matter of principle, which is why there are many digital projects and no company leaders from this area. This should be at least a member of the board of directors. Almost everyone, who is involved in digitalization is subordinate to the operating director or IT director, but not the leader in digitalization. Again, in this case, banks underestimate the need for digital transformation and a person responsible for such reforms. The director of digitalization should be the only top manager directly reporting to the CEO. It can be even the CEO himself if the company is seriously counting on the success of the digital transformation.

At least a quarter of the Top management should be taken by people, who have made a career in digital technology. Today, in senior management, almost 90% of banks do not have a single professional in this industry. This is the path to disaster, especially considering that the banks have no more than five years reserved for structural transformation. Taking into account the EAEU digitalization agenda until 2025.

Advanced in Fintech

If the management team of the bank remains the same, and the employee sincerely believes that the future is behind digital technologies, severe changes need to be made to the work processes of any bank. These can be banks or start-ups led by technologically advanced specialists. Digital vision will not arise where there are no leaders who understand digitalization. Most of the top managers in banks try not to change the ABS because they do not have a common vision. As long as the ground beneath their feet does not burn, you can evade them. Most IT directors have no time to explain things to management. All their resources are used to ensure that the bank continues to function (80% of the budget is spent exactly on this).

Therefore, who will form the concept of digital technologies in the bank if there are only bankers on the board of directors and there is no one to object to them? Key to success is to implement FinTech resources and let the bank industry transform digitally. Artecha expertise allows us to implement these technologies to life and help financial organization digitalize smoothly. Let us know if need any additional information and let you financial company lead the fitter market of banking industry.