• Germanas Kavalskis, Chief Communications Officer at Penki Kontinentai Group


• 02.05.2019 11:15 am
Fintech , Banks

Do you want to take a strong position in the field of financial services, to be successful, innovative, and attractive to investors? Become a FinTech. This term has dominated the financial technology industry in recent years.

What is FinTech industry?

If you are FinTech, then you create modern solutions in the field of mobile payments, digital lending or money transfers. Your technology is necessary for the user who does not want to spend time in queues, fill out the documents, and then wait a week for answer.

Now it is possible to solve many problems with a mobile phone: sign documents using the app, open a bank account and transfer money overseas. Does that sound good? Of course! And not only for clients, but also for investors.

Who participates in the race for the title of FinTech capital?

In the first half of 2018, 23 billion euros were invested in European FinTech companies. However, investments in the British financial technology market amounted to more than 15 billion euros just in the past six months. It is no wonder that London is considered the FinTech capital.

British companies plan to relocate because of Brexit. They do not want to lose their European customers. Not only such giants, as Germany or France, but also small countries participate in the race for the right to lead in the field of financial technologies. For example, Lithuania, which has attracted many IT companies and has formed the image of an attractive country for investors and foreign companies.

What are the FinTech advantages?

However, the FinTech development does not benefit the banking sector, which is considered conservative and not flexible. Based on statistics on the reduction of bank branches in many countries of the world, some analysts say that FinTech is the future, and banks are the past. You cannot argue with numbers. According to the British Bankers' Association, for 2011-2015 the number of bank branches clients decreased by 32 percent. Since 2015, about 60 branches have been closing every month. Can we talk about the sunset of the era of traditional banks?

According to experts, the FinTech 's power is the progress in an area that is not in the focus of banks. However, if we consider the reasons why banks seem conservative, the situation will clear up.

Conservatism or reliability?

Infrastructure. Standard FinTech is a team of 10-20 people working on an innovative solution. Often they use the infrastructure created by other organizations, for example, an ATM network with the ability to cash money for free in any country or region. As a rule, FinTech offers solutions without large investments, end users should receive convenience and simplicity, not costs. On the other hand, the bank has an infrastructure, which includes not regions, but several countries. Accordingly, it requires additional time for the introduction of new solutions, not to mention the cost of maintaining this infrastructure.

Security. At the beginning, FinTech companies focus on the sale of the product, so security specialists appear in their team much later. Often it happens only after the discovery of serious security gaps, which entail the risk of personal data leakage. Such consequences can lead to millions in damages and litigation costs. In turn, one of the main bank priorities is security of financial assets and consumer data. The statistics on physical attacks on ATMs are impressive: the number increased from 188 (in 2005) to 1081 (in 2017). So, investment in security is a must.

Regulatory issues. The FinTech advantage is its flexibility, as well as quick adaptation to market changes. On the contrary, banks are criticized for being slow and careful in introducing innovations. If a financial institution takes on new obligations or introduces activities that are regulated by government, its control is tightened. So it turns out that innovations disappear in the bureaucratic abyss. Many banks’ innovative ideas do not reach the end users if they do not comply with the regulatory framework.

How to respond or What to do?

First of all, look for synergy. Do not compete, but complement each other. The FinTech can become a testing ground for innovative solutions that can later be used by banks, managing large resources and having access to a large audience. Partnership with FinTech will help traditional banks to improve their positions in a competitive environment and form the image of a progressive, technological and available service.

In the long run, it is not so important, where is the FinTech, and where is the bank? Will it be mobile or virtual? The function itself is important. Moreover, it will probably remain the same – provision of financial services. Thus, it is too early to say that FinTech is the future, and banks are the past.

The Penki Kontinentai Group is one of the leading international corporations in the areas of banking technology, innovative payment solutions, and telecommunications services. The Group includes group of companies main of which are Penkių kontinentų bankinės technologijos (BS/2), the company of banking technologies and retail solutions, ASHBURN International, which specializes in solutions for the management and monitoring of POS terminal networks. The Group’s specialized software and technological solutions created are widely used by international banks, financial institutions, retail and business companies and are offered to 80 world countries. The Penki Kontinentai partners with such leading world companies as Diebold Nixdorf, Cisco Systems, Microsoft, IBM, Motorola, and many others. Group has a branch network in Estonia, Latvia, Lithuania, Azerbaijan, Georgia, Kazakhstan, Kyrgyzstan, and Uzbekistan.