FinTechs are considered to be the banks’ biggest competitors. The foundation of the existing financial system is made up of several antiquated and outdated practices. Instead of being frictionless, traditional banks are typically time-consuming and glitchy. People are searching for a finance solution that meets their needs as customer standards continue to shift in favor of quicker and simpler processes.
In this post, we’ll examine what financial technology is, how it differs from traditional banks, and how it will develop in the future. Instead of using technology to create ground-breaking products, digital businesses are increasingly entering the banking industry directly with cutting-edge client solutions.
How does BNPL success work?
FinTech companies that offer Buy Now Pay Later (BNPL) have a very strong online and social media presence. BNPL has developed into one of the most alluring methods for consumer borrowing.
The customer doesn’t pay interest with a 0% loan, which is an extremely appealing lending offer. The interest on the purchase, however, is ultimately paid to fintech by the retailer. This implies that even for big stores that can pay the higher cost of working with FinTechs, leading financial firms will unavoidably emerge as the more challenging option from a merchant perspective while still being able to provide the alluring 0% interest credit at checkout that clients use BNPL solutions for.
Because of this, banks are watching fintech businesses steal their customers, even though they have been lending to consumers for several hundred years and possess the bank balances and interest rates to completely crush these Silicon Valley upstarts.
These direct lenders are fintech firms. They are tech firms whose services check the creditworthiness of prospective consumers. After receiving approval, FinTechs pay the retailer with funds borrowed through investors, and clients reimburse the FinTechs. Silicon Valley companies currently dominate the BNPL market, but banks are eventually best positioned to prevail. The only thing they need is the equipment needed to deploy.
What are traditional banks and how do they answer?
Banks are financial organizations with the legal right to accept payments from both individuals and companies as well as to lend money to clients. Some banks also provide investment management, safety deposit boxes, and money exchange services.
Corporate, retail and financial firms are just a few of the several types of banks. In most nations, they are often controlled by a central bank or even the national government.
Thus, they saw a sharp increase in the BNPL sector during the past few years and a sharp decline in consumer spending. On the other side, banks are beginning to develop better ways for their customers to recover them. As dangers from various Fintech startups have been discussed, BNPL’s reputation has suffered. Naturally, not all BNPL lenders are affected, but conventional banks benefited from it.
We may simply state that both the banks and the Fintech companies have advantages over the other, making it impossible for one side to prevail in the long run. To put it simply, they must find common ground to deliver a service that will satisfy all of the customers.
Traditional Banks And FinTech Can Work Together
Large deposits held by traditional banks make them a potential partner for FinTechs looking to improve financial systems. Both BNPL providers and banks serve as financial mediators and should never lose sight of their customers. Fintech companies provide their customers with more immediate and sophisticated features while offering the same services as traditional brick-and-mortar banks. If FinTech and banks work together, they will be governed by the same governmental agencies, which can promote confidence. The enhanced technical FinTech can offer to the bank will enhance the financial sector as a whole.
In this regard, ChargeAfter, one of the top BNPL service providers, has previously provided banks with BNPL white label service. It is the consumer finance company’s first effort to cooperate with banks, and it has the potential to alter the way that consumer lending operates in general.
The Bank of Missouri’s product, Fortiva Retail Credit, has been a pleasure to work with for ChargeAfter. The alliance was just expanded this year after the collaboration went wonderfully. It demonstrates once more that BNPL providers and banks may work together to enable customers who want to split a transaction into many payments with better service. New partnerships are expected to have an impact on the financing process for BNPL both online and in-store, and consumers will be able to have a much more pleasant experience.
ChargeAfter is a leading multi-lender platform for Buy Now pay later (BNPL) Consumer Financing. It connects businesses with the most reliable lenders, enabling them to offer customers the greatest financing solutions. With the best system of Waterfall Financing, ChargeAfter guarantees BNPL lending to every shopper, by matching the most relevant lender to every client. Using the unique consumer financing technology, ChargeAfter provides all parties, merchants, lenders, and consumers, with the best shopping experience. Phoenix, MUFG, VISA, Bradesco, BBVA, Synchrony, PICO Partners, CITI, Propel Venture Partners, Plug and Play, and other companies worldwide are among the investors of ChargeAfter.