Fact fans may be interested to know the term fintech was first used in 1971, two years before the first ATM appeared in the United States. Although it was a few more decades before it entered common parlance, we have reached a point where most people are comfortably interacting with it and feeling the benefits in their daily lives.
Traditional banking has been revolutionised – this writer is still astounded to have never owned a chequebook, which once seemed the ultimate seal of adulthood. Meanwhile, for the next generation everything is paperless and the concept of a bank is an app, rather than a physical building they would visit.
David Kerr, founder of comparison website Bonkers.ie, says he has seen consumer attitudes towards neobanks subtly shifting in the past few years as new entrants to the market gain impressive customer numbers. Revolut has amassed 2.7 million adult customers in Ireland, although many of those use it as a secondary account, still clinging to banks that offer some physical presence and human touch.
Kerr thinks this stems from a wariness, rather than loyalty to traditional banks: “It’s not so much loyalty as a psychological shift in mindset to what money is – data – and what a bank is – an app on our phone.”
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Now that neobanks are offering a full suite of services (personal loans, credit cards and instant-access savings accounts), as well as Irish IBANs, he thinks younger customers – such as the 400,000 under-18 users of Revolut (whose accounts are managed by a linked adult’s account) – may not bother opening a traditional bank account in the future.
“They simply may not see the difference between a neobank and a ‘traditional’ bank, and their decision may be made more on [the basis of] the mobile app offered than the availability of a branch network,” he says.
Artificial intelligence (AI) is set to further disrupt the industry in the coming years. Benedikt Voller is chief revenue officer for Raisin, an online marketplace that connects consumers with partner banks internationally so they can benefit from best available interest rates for their savings. He predicts that AI may transition from assisting with financial decision making and automating customer services to autonomously managing entire financial systems within the next decade.
“Dynamic risk assessment, asset management, financial forecasting and fraud detection will no longer be carried out across separate systems but will be integrated into advanced, centralised AI. This AI will be capable of predicting and reacting to market movements, customer behaviour and regulatory changes in real-time,” he says.
Voller also sees AI and big data being used to further personalise banking services for customers, based on individuals’ financial behaviour: “As we move more of our lives online, so does the opportunity for big data to tailor what could feel like a digital landscape with no horizon into a hyper-personalised space driven by companies using precise customer segmentation.”
However, what is exciting him right now in the sector is the opportunities afforded by embedded finance to eliminate barriers between finance and other industries.
“It provides users easy access to financial services without using separate banking or financial apps,” he says. “This benefits fintech companies by making it easier for customers to use digital wallets or other fintech payment methods for online purchases, such as interest-free loans at checkout, user-friendly one-click payment apps and offering branded checking accounts and debit cards for core users.”
The potential for digital money to improve access to banking in developing countries is already proven, yet still a growth area.
“Affordable access to digital cash and mobile transactions could open the door to financial services for the 1.7 billion people who do not have traditional bank accounts,” says Voller.
Louise Kelly, an executive with Ibec’s Financial Services Ireland group, agrees: “Globally, a significant portion of the population remains unbanked or underbanked, especially in developing economies. Fintech presents a groundbreaking opportunity to empower these individuals.
“Mobile money, a powerful tool driven by high mobile phone penetration in these regions, is leading the charge. Fintech companies are creating mobile platforms for payments, money transfers and even micro-savings, fostering economic activity and inclusion.”
In Kelly’s view the Republic is primed to be a big beneficiary of the convergence of tech firms and financial services firms over the coming years; she believes it can play a crucial role in developing these solutions: “With the right environment, Irish financial services firms will play an even bigger role over the next decade in transforming how people and businesses manage money worldwide.”
That’s not to say that she predicts the demise of traditional banks, which she sees as remaining a “vital cog in the financial machine”.
“Their deep understanding of the economy and unwavering focus on customer experience solidify their position,” she says. “Additionally, banks will play a crucial role in funding the green transition – their vast resources are essential for a sustainable future.”
Kerr is not sounding the death knell for traditional banks any time soon either, although, he cautiously advises they may need to look for fintech collaborators.
“Irish banks are small compared to their European counterparts and technology improvements don’t come cheap; this will pose a major risk for Irish banks. They have pretty much all the security and technology cost overheads of much bigger banks without a large customer base to pay for it,” he says.
With branch closures causing outrage, banks will need to look beyond cost-cutting to expanding their offering in order to futureproof their business, in Kerr’s view: “They’ll need to reimagine their place in consumer’s financial life a bit more – they will likely see their brands being stretched beyond daily banking services and into wider areas of financial services as either direct providers or enablers through technology.”