Fintech “Cannibalization” Leads to Reduced Bank Revenues

Daniela Kirova from Bankless Times talked to Amer Vohora, the CEO and Founder of Swiss Fortress AG. Swiss Fortress is a simple and secure non-custodial wallet, which utilises the ultra-convenient “send to name” function for supported tokens.

What is your take on the digitalization of the finance industry?

Striking a balance between leveraging technology's advantages and mitigating its potential drawbacks will be crucial for creating a resilient and inclusive financial landscape. It is this financial inclusion, especially in developing nations such as those in Africa, that I’m excited about the most.

What are some factors behind fintech’s biggest successes so far?

Fintech's most significant successes can be attributed to its ability to combine technological innovation with addressing key financial pain points. Seamless user experiences, convenience, and accessibility have been central, with user-friendly mobile apps, efficient digital payments, and personalized services gaining traction.

What are some ways fintechs can benefit banks?

By leveraging fintech solutions, banks can enhance their digital offerings, streamline processes, and improve customer experiences. I experienced this firsthand when I was a banker at Rothschild, and the bank rolled out Avalog as the centralized banking software running the back office.

Fintech partnerships, such as Avalog when I was a banker, can accelerate the development of new services, such as mobile banking apps, digital payment platforms, and robo-advisory services, enabling banks to cater to changing customer preferences.

Can fintechs be damaging to bank activity in some way?

Yes, fintechs can pose certain challenges to traditional banks who are defensive as their customer base is cannibalized. They can divert customers away from traditional banking services, particularly if fintech offerings are more convenient, cost-effective, or tailored to specific needs. This cannibalization can lead to reduced revenues for banks, but it keeps banks agile and motivates them to deliver the services the clients want.

What requirements should central bank-issued digital currencies (CBDC) fulfill?

Firstly, they should ensure financial inclusion by providing access to a wide range of individuals and demographics. Privacy and data protection are vital, requiring CBDCs to incorporate robust security measures while safeguarding user information. Interoperability with existing financial systems and cross-border transactions should be facilitated. CBDCs must be designed to mitigate financial risks and ensure stability while adhering to regulatory and legal frameworks.

Is collaboration between banks and fintechs a good option for consumers?

Collaboration between banks and fintechs is generally a favorable option for consumers. It brings together the traditional banking expertise of established institutions with the innovative agility of fintech startups. This partnership can lead to the creation of user-friendly, technologically advanced financial services that cater to evolving consumer needs.

Is it possible to transition from traditional to purely digital banking?

Transitioning from traditional banking to purely digital banking is indeed possible and, to some extent, already underway. We saw this with the first wave of robo-advisors and now neo-banks.

Transitioning from traditional banking to purely digital banking presents several main challenges. One of the primary concerns is addressing the digital divide, ensuring that all individuals, including those in underserved or remote areas, have access to the necessary technology and connectivity. This financial inclusion is what Swiss Fortress solves.

How is consumer trust best earned in the relatively new fintech industry?

Fintech companies should be open about their practices, including data usage and privacy policies, fostering a sense of honesty and accountability.