Another title could have stated: Every company will have the chance to provide financial services given the degree and speed of innovation in fintech. The state of the matter is that dipping your toes into finance and starting to provide financial services to your customers could prove to be quite profitable.
The trust in banks is diminishing
We live in a young world. According to CNBC citing the World Economic Forum, more than 50% of the world’s population is under 30, and they are reportedly cautious with banks. During WEF’s 2017 survey, 45.3% of respondents stated that they don’t trust banks to be fair and honest. Instead, only 28% declared that they trust their banks.
Most of the world expects technology to increase trust in financial services and, given that banks are notoriously slow and wary of change and innovation, we must look towards younger companies and fintechs.
Still, one might wonder ‘if fintechs are so cool and innovative, how come banks are still going strong right now?’. Fair point, and that’s because, and we’re speaking of big banks now, financial institutions often pack 100+ years’ worth of experience and they have a strong physical presence. Also, although banks invest big bucks in innovation and technology, it appears that 75% of their IT budgets go to maintaining their current systems.
There’s hope for the future
It used to be that it took up to 15 years for a software company to emerge on the market. Now, with what we call “Infrastructure-as-a-Service”, you can start such a company with a credit card and a laptop.
According to Forbes, through Amazon Web Services startups can gain access to free tools, resources, and even thousands of dollars worth of credit, among others.
Why should I offer certain financial services and not become a bank altogether? Becoming a bank could be a great idea if you have the money and lots of time on your hands that you wish to waste on waiting for a banking licence. And applying for a licence is just the first step, followed by many others.
Instead, companies’ needs gave rise to Banking-as-a-Service, or BaaS, which, according to Nigel Verdon, Railsbank’s CEO, ‘has all the components you need to build any financial product - issuing a bank account, sending/receiving money, issuing accounts, controlling cards, issuing credit, issuing insurance’. By tapping into BaaS, you can build a neobank or become a lender. ‘BaaS is the key in allowing any business to build financial services products or any business to become a fintech’, says Nigel.
Learn from the great
Let’s take a look at Apple. Going beyond providing Apple Pay, the tech giant started offering Tap to Pay technology just this year. Through this feature, iOS users can finally use their phones as portable POS systems for their businesses.
To sum up, a company that started with innovation and development in the technology sector, chose to provide financial services to their loyal customers which, in turn, will raise its customer base. If a company that definitely had a lot of revenue already chose to dive into enabling payments on the phone they are making, what’s stopping you to give financial services a chance?
More on Apple’s announcement and what it means to the industry as a whole, here.