FinTech has become a major buzzword in the financial services world. In the decade that has passed since the global financial crisis, financial technology startups have made huge waves in gaining market share. Born out of a reaction to the stranglehold which traditional financial institutions had on the sector and propelled through relentless technological innovations, FinTech companies have become more popular, more diverse and more ambitious. The explosion in fintech over recent years has changed the financial landscape in a way not seen since the proliferation of the internet during the dot-com era forced financial institutions to make sweeping changes.
While the most notable success for FinTech has been within the consumer and small-business banking space, some firms have now started to make inroads into the notoriously guarded corporate banking field.
FinTech Gaining Ground in Consumer Banking
Success stories in the consumer and small-business banking space are plentiful. Here, FinTech firms have been using advanced software solutions to attract customers away from traditional financial institutions. The best example of this is the rise of mobile/online banks. Moving away from the traditional branch-deposit banking approach, these companies offer rival banking solutions to customers, providing intuitive technology and flexible services which many customers have begun to prefer over more rigid and limited services typically offered by traditional banks.
These banks effectively operate in the digital space only. Consumers can transfer money from their existing accounts, but from there the money is accessed solely via apps and debit/credit cards, without the need for branch interaction. Many of these "challenger banks" offer better interest rates and much more flexible services, with apps allowing customers to interact with their accounts at all times.
The pressure to respond to the popularity of these services has been clear, with all major banks now offering their own apps, giving consumers much more control over their accounts. This is just one example of how traditional financial institutions are having to keep up with the technological advantages of FinTech.
Difficulties For Fintech Breaking Into Corporate Banking
In the world of corporate banking, however, the path has not been so smooth. Within retail banking and, for the most part, small-business banking, clients are more prone to switch provider in a bid to secure the best conditions.
Conversely, in the world of corporate banking, client/provider contracts are typically relationship-based. Corporates work intimately with a provider over a number of years so that the provider is able to tailor its services to cater specifically to the needs of the client. Given the time and money this takes, switching provider is not as easy a decision as simply being drawn to innovative new technology, improved user experience, or even slightly improved commercial terms.
Trust is another big issue which poses an obstacle to FinTech firms attempting to break into the corporate space. Given the regulation involved in corporate finance, firms require a much greater degree of confidence in a provider before they become attractive. Scale is also a key concern, with many corporates still unsure whether FinTech firms would be able to handle their volumes of transactions, provide access to sufficient credit facilities, and more.
Consequently, even today the decision for a large corporate to move away from traditional financial services firms and toward newer FinTech startups is not a common one.
There are areas, however, where Fintech firms are starting to penetrate corporate banking. Many corporates are becoming increasingly aware of the advantages that FinTech firms can offer in helping them take better control of their operational processes. Where foreign exchange transactions are required, liquidity may still be provided by a major established bank, but FinTech offers a route into user-friendly electronic trading, greater access to market data, and many other benefits.
How Just’s Strategy Is Making Waves With Corporate
Within this space, Just has made significant inroads into the corporate treasury space, offering corporates zero-deployment software-as-a-service (SaaS) solutions to augment the facilities provided by their established bank liquidity providers.
Just aggregates data from 20 banks, ECNs and brokers to give access to real-time and historic market data which would previously only have been available to institutional traders, and provides extensive operational management and reporting tools to support CFOs and tresurers in their FX activities.
And we are not stopping there. We are already trusted by many of Scandinavia's largest corporates across a number of industries, and we are expanding our product portfolio to deliver additional disruptive FinTech solutions to help corporate finance professionals manage their workflow and operations.
As more FinTech firms, like Just, begin to penetrate the corporate space through these gateway areas, the future of corporate banking looks set to shift, fortunately, for the benefit of corporates.