Could FinTech Actually Be Helping Bank Loyalty?

Typically when the relationship between FinTech and banking is written about the former is said to be disrupting the latter. This would imply that FinTech companies were hurting the big banks when in actuality it's far more complex than that. The latest wrinkle in this debate is a recent post by Josh Constine on TechCrunch that argues that FinTech and finance apps may be helping banks to increase loyalty among their customers. The FinTech sector has been growing rapidly over the past few years. In fact investments in FinTech firms have gone from just $4 billion in 2013 to over $19 billion last year. These companies range from investment and personal finance apps to peer to peer and marketplace lenders. It is true that many FinTech operations do disrupt certain services that banks have typically provided. For example customers and small businesses might be inclined to apply for a loan from Lending Club instead of bothering to hit up a traditional bank. Additionally some banks have had their spats with finance apps and even denied such applications access to customer's accounts on the grounds of privacy and potential legal liability. What's interesting is that, by using these personal finance apps and even payment services like Apple Pay, customers are becoming more attached to their current banks. At this point switching banks would require many FinTech users to update their information on a multitude of apps and commerce sites, lest their automatic payments be declined. This friction could be enough to prevent a customer from jumping ship even if they are dissatisfied with some fee policies or have other issues with their current institution. Constine even confesses, "Now if I lose a credit card, I’m more inclined to tell my bank I accidentally destroyed it so they send me a replacement with the same card number to avoid the hassle." In the end Constine refers to FinTech and banks as being "frenemies." Personally I think the relationship is actually more positive than that. As we've seen in the case of Lending Club and BancAlliance as well as OnDeck and Chase, there is plenty of opportunity for the new and old sides of finance to team up. After all it's already been shown that the two are more complimentary than competitive with each displaying strengths that mirror the other's weaknesses. This notion that FinTech apps could be assisting with bank loyalty is just the latest realization that there's far more to the FinTech/banking relationship than meets the eye.

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