“Fintechs cannot fully replace traditional banks,” says Johan Gellatly, MD of Altron FinTech. “Fintech companies offer innovative solutions that challenge certain traditional banking models in niche verticals where there is evidence of high consumer engagement and transactional friction.”
Fintechs with streamlined processes and digital-first approaches provide agility and efficiency, often lacking in certain processes of traditional banks. However, Gellatly cautions against viewing fintechs as direct competition to traditional banks at all. While fintechs excel in certain niche areas, such as providing tailored services and quicker responses, very few fintechs can match the breadth and depth of services offered by traditional banks. “Traditional banks are key to the success of fintechs and won’t disappear. We require traditional banks to evolve, innovate and grow and partner with fintechs,” Gellatly reiterates.
There are various strengths that traditional banks hold over fintechs and, despite the disruptions caused by fintechs, traditional banks maintain dominance in crucial areas like corporate and investment banking, and their physical geographical reach to service larger enterprises will always be a requirement. Their extensive experience and resources make them indispensable for large enterprises requiring substantial investment capital to achieve domestic and global reach. Moreover, traditional banks possess the expertise to serve a wide range of customers. Fintechs predominantly service a range of niche needs of tier two to four enterprises to SMEs in a similar way that traditional banks operate; however, fintechs will always need to be bolstered by the strengths banks have to process large volumes of transactions.
Trust and security are paramount in the financial industry. “Altron is a listed entity, and we comply with all the requirements of the Personal of Protection Information Act, and more,” Gellatly says. “We deal with large payment transaction volumes so there is a high level of security and trust involved to protect all the participants in a secure payment transaction.”
While both fintechs and traditional banks face vulnerabilities, traditional banks have an edge due to their extensive experience in building resilience against cyber threats. Consumers evaluating the use of fintech solutions must conduct thorough research to ensure adequate security measures are in place to protect them against the bad actors in the industry.
“As a fintech we make it our business to ensure compliance with the required governing bodies. We must be payment card industry certified, Euro VISA and Mastercard certified, just to name a few, apart from being compliant to the various regulatory bodies,” Gellatly notes. “So, we are very focused on compliance; should we be found not to be, we won’t have a business. We get audited every year by independent auditors by the various bodies that we participate with. Our business can’t exist without compliance and provides peace of mind to our customers when they contract with us for the use of our services that compliance is taken care of by us.”
Regulatory compliance presents resource challenges for both traditional banks and fintech start-ups. Regulators play a crucial role in ensuring consumer protection and financial stability in the national payment system. While adapting to accommodate the rapid pace of fintech innovation, regulators must maintain stringent standards to safeguard the integrity of the national financial payment system. Compliance is non-negotiable for both traditional banks and fintechs, with audits and certifications essential for building trust with customers and consumers when they make use of the national payment system.
Collaboration between traditional banks and fintech companies is increasing. For fintechs like Altron FinTech, partnerships with traditional banks are vital to leverage off their infrastructure and regulatory compliance. By offering agnostic platforms and facilitating choice for consumers, fintechs enhance the financial ecosystem while leveraging the stability and resources offered by traditional banks. One such collaboration is the deployment of our high resilience multi-acquiring banking solution, a partnership with multiple traditional banks, which Altron FinTech has experienced as a massively successful partnership for both its customers and consumers.
Gellatly emphasises the importance of having perspective and driving financial inclusion in the fintech landscape. "While striving to innovate, fintechs must not lose sight of the sizeable population lacking access to cost-friendly banking services. Learning from successful examples like Capitec Bank, which prioritises financial inclusion, fintechs can assist to bridge the transitioning gap from cash transactions to formal electronic banking, ensuring broader and deeper accessibility, and to engender trust in the national financial payment system."
While fintechs can introduce disruptive innovation and agility to the financial services sector, traditional banks remain pillars of stability and expertise. Collaboration between the two is essential for driving industry progress while addressing the diverse needs of consumers. Trust, security and regulatory compliance will continue to shape the evolution of fintechs and traditional banks, ensuring a robust and inclusive financial ecosystem.
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