What are the differences between fintech and banks

Fintech is nowadays a popular word in the digital decade. Although it is different from the traditional bank, the development of this field starts when computer scientists want to find a better way to bring financial services to more unbanked and underbanked people.

So, what are the differences between fintech and banks, let’s find out them with FinFan.

First, traditional banks need more troublesome procedures.

In the article “How fintech can help developing countries?”, FinFan discussed some administrative procedures, that the underbanked and unbanked people can’t qualify for to make a transaction or borrow money.

The best example here is, U is a student from a small village. She comes to Sai Gon for studying. She wants to borrow a small money to pay for her school. However, she doesn’t meet the quota to receive a loan from traditional banks when they force her to show some proof of income (if she doesn’t have one, they take it from her family’s members) or household registration.

That is in the contrast with fintech, where they can serve this problem for her with some simple clicks, forms on the internet and her citizen identification. She can get the loan in just less than 5 minutes.

Second, banks need many branches and bank tellers and fintech doesn’t.

Over the past 10 years, the success of banks is recognized by how many branches that they have. The more branches that they have, the more reputation and reliability they are.

I remember from 2008 to 2012 when I asked my brothers’ and sisters’ friends about choosing majors for studying at university, most of them chose financial and banking majors. Because at that time, banking was a trend and that would give a high salary after graduating.

However, after more than 20 years of the development of traditional banks, the ratio of unbanked and underbanked people in Vietnam is still high (over 70% according to the nearest data from World Bank statistics). That is a big failure when banking in Vietnam hasn’t updated the technology to the banking procedures easier and more convenient.

Now technology is developing and the banking system is also gradually changing direction, many NEOBanks and digital banks in the world have been established and grown so fast and Vietnam isn’t out of this trend.

Because of the pandemic, many traditional banks were increasingly promoting the digitalization of banking services via apps to attract more consumers.             

The convenience of e-banking has attracted customers and provided service free of charge for customers. Digital products such as payment by quick response code (QR code), savings deposits, digital loans, and most recently Electronic Know Your Customer (eKYC) have been used by many people.

The last one is traditional banks take time and money to take some banking services.

I remember that 6 years ago when the pandemic didn’t come when I want to open a saving account, I had to go to the banks’ branches, ask the bank teller for the procedure to open a savings account and then fill the bank’s form with lots of legal documents need to bring.

Since digital banks have opened, this process has shortened time to just 1 click. Now I can open saving accounts just by using the apps of digital banks and don’t need to come to bank branches anymore.

Another time when I wanted to transfer money to my cooperation and he had a different bank than me, it takes more than 1 day of work for this transaction and cost too much transaction fee. However, my partner urgently needs this money for her business, which led him to come directly to my place and take this money in cash.

Nowadays when digital banking has developed and been used widely, it takes a few minutes for the money to come to my bank’s account and it’s costless.

Through these examples in this article, we can learn about what are differences between traditional banks and fintech and how fintech can help us to take payments more convenient and faster.