Difference Between Traditional Banks And Fintech

Decoding the difference between traditional banks and Fintechs

Business Tips, Fintech 0 Comments

With the advent of technologies like 4G and chatbots, the banking sector today has been transformed massively. The monopoly of the legacy brick and mortar banks has got disrupted with the emergence of Fintech firms reshaping and transforming the readymade infrastructure of banks to new use cases of agility and technology. Online businesses and transactions have become popular and smooth. Let us look into what exactly are the major differences between Fintech firms and the traditional banks.


• Fintech firms specialize in identifying the gap in the marketplace while traditional banks cater to the mass audience.

• While traditional banks focus majorly on the risks associated with every transaction, Fintech firms focus mainly on achieving customer experience and satisfaction.


• Traditional banks had been dawdlers, lending business loan, accepting deposits and have a very supple business model focusing majorly on security and trust, considerable capitalization and indifference towards the customer.

• Fintech’s focus is centered on mobile functionality, agility, accessibility, big data, cloud computing, personalization and convenience selecting a change around social media, mobile platforms and smartphones.

Communication Pattern:

• There is always face-to-face communication in traditional banks where attitude and response of bank employees differ from person to person, time to time and accordingly the possibility of seamless customer interaction is less. For example, an individual enquiring for a business loan may not be satisfied with the response from bank staff and he might have to run around to another bank to quench his thirst of proper information.

• Fintech solutions disseminate faster transactions, immediate consultation, 24×7 permanent access, and remote account opening which provides much more significant communication with the customers.

Potential Coverage:

• FinTech companies have larger market coverage due to its enormous access to mobile phone connectivity. The physical presence of traditional banks is very less compared to Fintech firms. In India, for example, access to mobile phone connectivity stands at 80 percent whereas the distribution of traditional banks is just 35 percent which has given FinTech firms or products a clear advantage over traditional banks.

Key Functioning:

• Banks are more oriented towards the age-old process, regulatory framework, and systems that restrict their ability to quickly shift to or adopt a new technology or product that can address customer issues. Since Fintech does not have any organizational structure, they are free of the legacy framework and have fewer barriers to alter.

Technology Perspective:

• The faster rate of FinTech’s functioning is largely due to technologies like artificial intelligence, automation, and machine learning.

• Traditional banks are still struggling with the inherited infrastructure.

• Due to technologies employed by Fintech, there are lesser mistakes and better quality of service.

India has already stepped into the FinTech ecosystem with a good asset of brilliant and economical talent. A good example of banks partnering with Fintech firm is that of collaboration between ICICI Bank and Paytm. With inventive ideas and up-to-date technology brought in by FinTech companies, the traditional banking system and business are set to get disrupted for which banks must rebuild their business models accordingly.


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