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Fintech vs Traditional Banks: Competition or Collaboration?


9 min read

Fintechs reshape the banking industry as people become more accustomed to the comfort of having everything under one’s fingertips. New digital banking solutions allow people to get the same services as from traditional institutions but enhanced with personal advice, customized recommendations, gamification, and other fresh ideas.

Neobanks are vastly spreading across the industry, present in most countries. With about 19.9% of the US digital banking market compound annual growth rate (CAGR), the question arises; will fintechs replace traditional branches? This article is set to find out.

What is Fintech, And How Can It Compete With Traditional Banks?

The term fintech stands for financial technology which is divided into several branches; for example peer-to-peer payment services, trading platforms, financial advice services, portfolio management systems, etc. Those of the fintechs that might compete with traditional banking are challenger banks and neobanks, so let’s talk about them in more detail.

What are Neobanks?

Neobanks are fully operating banks without traditional brick-and-mortar physical presence. These organizations are focused on providing mobile-first banking services exclusively. In the UK, the term challenger bank is used, though it refers more to the small banks that emerged during the 2007-2009 financial crisis. These banks are mainly smaller but compete with the larger-established institutions.

In 2022, the global market value of the neobank segment reached $66.82 million, with a positive dynamic compound annual growth rate of 54.8% from 2023 to 2030. The main reason for this astonishing success is the high demand for convenience among consumers, along with the usability of such services that have arisen in post-COVID-19 society.

There are several special features that differentiate traditional bank organizations from neobanks, favoring the latter. Here are some of them which are the most distinguished in DashDevs’ opinion.

The most prominent neobanks advantages

  1. User-friendliness and comfortability. Neobanks are created for various groups of people with different incomes, so they offer affordable services and, in some cases, subscriptions. Also, to make the applications more attractive for customers, they often have minimalistic and easy-to-use UI.
  2. Time-effectiveness. In contrast to traditional banking, financial technology companies offer a more time-efficient account opening process. Instead of taking the time to book an appointment at a physical bank branch, fill out the paper form, and wait for approval; neobanks offer a seamless full-remote approach that enables users to open an account from a mobile phone or a laptop.
  3. Higher affordability. The above-mentioned affordability for various groups of people comes from the absence of need to pay for the physical presence of the branch. When there is no need to pay for electricity, infrastructure, and rent, customers get lower fees. Also, due to the fact that some neobanks aren’t registered as official banking institutions, they have slightly more liberating policies regarding restrictions.

Fintechs vs. Traditional Banks: What’s The Difference?

With the definition of neobanks as direct competitors for brick and mortar financial institutions, it’s easier to understand where the line between those two lies. But let’s take an unbiased look at the main differences between them in more detail, and maybe this will help you uncover some new aspects of the domain.

Different Priorities

You already know what a fintech company is, and you probably have some experience working with traditional banks either. How can these two be fundamentally different with priorities? Well, let’s take a peek at the customers’ pain points for both traditional and fintech companies.

For traditional banks, the number one problem is customer retention rate. While for financial services as general, the number stays at 78% banking as a segment reached only 75% in 2023. This might cohere with the rising expectations towards the banking sector as well as an overflowing market that generates higher competition.

For fintechs, the first challenge is data security. In 2021 alone, the number of data breaches cases amounted to $4.24 million in financial losses. This results in the failing trust towards neobanking solutions. And, as a part of the issue, regulatory compliance is also an issue for online banking.

So, how do their priorities differ according to the pain points? First, traditional banking primarily focuses on customer digital security. Their regulatory compliance and warranties allow customers to feel protected, which is the primary reason for traditional banking to hold up to their positions.

Neobanks, in turn, pivot around the customer satisfaction and comfortable usage of their services. They center the experience, providing consumers with unique capabilities and features like financial advice, personalized recommendations, and gamification that endorses the desired spending patterns. All this helps customers change their habits and make the overall experience much more enjoyable.


The audience of neobanks and traditional banks surely can’t be that much different. However, fintech banks and physical branches have different coverage despite targeting relatively the same clientele.

Firstly, people who use neobanks’ services are drastically younger. According to Statista, nearly 63% surveyed people between the ages of 15 and 24 use mobile banking as their primary banking method. And, following the Finer research, the largest group on fintech banking a.k.a. neobanks users are young and late adults, aged 18 to 34.

The number of population using digital banking services

In comparison, Rakuten Bank, Ltd. based in Japan conducted a similar survey, finding out that the largest portion of their audience are people aged from 40 to 49.

While age can significantly influence the general target audience, main differences between fintechs and physical banks start at localization. Physical branches, as the name suggests, are present in their region, helping local residents with financial matters.

Meanwhile, fintechs can be present in more geographic regions due to their online-only nature.

Apart from this, neobanks can afford to target people with various financial backgrounds and credit scores, being more flexible with regulations, while banking institutions need customers to have strong credit scores and track records.


Fintech companies have flexibility in everything, from adoption of new technologies to agile company’s structure. Banking institutions, on the other hand, tend to be more rigid in modernization due to the resolute organizational structure.

Forced to compete with modern and adaptable fintechs, banks feel the need to change in order to support their positions on the market. This forces both traditional and fintech banking companies to enter the never-ending race of innovations.

But does it have to be a competition, or can old and new find a way to collaborate? This question is set before us in the next paragraph of the article, and there is no need to delay the answer.

How Fintech Banks And Traditional Banks Can Work Together?

The needs and demands of modern clientele and the market change rapidly, so the opportunity for neobanks to satisfy the aforementioned wishes arises. In turn, traditional banking can offer more trustability and security since they’ve been present on the market for centuries, not to say the least.

So, since both of them can offer comprehensive services, the best way to leverage these market conditions is to cooperate. Some companies already do this successfully, and, learning from their examples, let’s find out how exactly this is possible.

Opportunities for Cooperation Between Traditional Banks and Fintech Solutions

The skepticism that traditional bank institutions had towards fintech solutions in the past seems to become weary with the growing popularity of mobile-banking. So, as traditional banks realize there is more profit in novelty, they are struggling to implement fintech solutions into their everyday workflow, apart from exclusive fintech banking. DashDevs offer some ways to build this collaboration that we see fit in today’s reality.

  1. Open Banking. Banks can leverage from the use of the API services. Open banking might enable banks to improve the customer retention rate and generate new revenue streams, as well as streamline the customer experience with third-party services for online financial operations.
  2. Enhanced security. For traditional banks, security is a top-priority, and they have always been better at this than online-only services. However, technical advancements can offer more with cybersecurity measures, double authentication, and innovative technologies like Artificial intelligence and ML capable of spotting fraudulent activities.
  3. Banking-as-a-service (BaaS) platforms. These technology solutions allow non-banking companies to implement banking services into their workflow. Seen as trending, the BaaS platform market segment is expected to reach over $6,943 billion by 2030. By the end of 2022, the market value of BaaS amounted to $637 billion. As leading banks launch their own BaaS platforms, this can be perceived as the best way to monetize their services at a higher level.
  4. Green finance. Eco-conscious companies are striving to implement technologies that will help them provide green products. Paperless options for bank accounts, cards produced from recycled materials, easy donation to ecoactivism initiatives; fintech industry is focused on eco-lifestyle as much as any, and can help traditional banking achieve the same goals.

5 Examples of Successful Fintech and Traditional Banks Partners

As you already know, there are loads of options for fintech in banking to be successful and profitable. Now, it is time to see how this works in practice, based on real-life cases of leading banks and fintech businesses uniting for better revenue generation and customer satisfaction.

  1. American Express and i2c. To improve the process of breaking into the fintech segment, American Express partnered with i2c, Inc–a digital-first payments and banking platform. The partnership enables fintech companies around the world to develop and scale payment solutions on the American Express network. Their agreement provides fintechs with benefits like access to pre-certified partners, which speeds up time-to-market.
  2. Mastercard and Finicity. Since 2020, Mastercard has been trying to enhance the account-to-account payment transfers. They’ve partnered with Finicity, an open banking provider, in order to gain advantage with the new technology. They’ve acquired Finicity for $825 million, and now their partnership resulted in Payment Routing Optimizer and Success Indicator products added to Mastercard’s digital environment.
  3. Amazon and JPMorgan Chase. Some people are claiming that if a big corporation would open an online banking business, they would surely have more trust in it. For over two decades now, Amazon has been partnered with JPMorgan Chase as their credit card issuer, proving the statement to be true. Amazon stayed loyal to their partner despite hinting on a shift, which both surprised and relieved their customers, as millions of users are spared from the need to transfer to a new card issuer.
  4. Deutsche Bank and Traxpay. The goal of Deutsche Bank partnership with Traxpay, a German fintech company with services aimed at discounted and reversed factoring solutions, was to infuse their finances into the supply chain technologies functional within the bank’s offering. The cooperation results were fantastic, making Deutsche Bank a leader in the supply chain financing.
  5. SIA and Banking Circle. Banking Circle is a fully licensed payments bank which partners with SIA, a leading payment services fintech company across the EU. Their goal is to provide customers with an opportunity for instant payments. The cooperation is proved to be successful as it allows clients to complete transactions nearly momentarily every day without days off. The payment can be executed only if it does not exceed 100,000 euros per one money transfer.

Final Thoughts

When a new technology appears on the market and disrupts it, we tend to form biased conclusions about it. Nonetheless, there is more to what fintech is aside from being a disruptive technology.

It does not seek to replace employees or traditional banking institutions, rather to improve the way customers handle their finances. Fintechs can give so much to traditional brick-and-mortar banks, like mere moments to complete a transaction, gamification solutions to endorse the desired spending behavior, and personalized recommendations.

Some people still see fintechs as a direct competitor to traditional banks. DashDevs concludes that this is rather a confined point of view, since there are many options available for fruitful cooperation.

If you’d like to hop on this train of innovation, drop us a line. We will help you turn technologies into competitive leverage.


What’s driving the adoption of fintech?

The number one reason for fast adoption of fintech technology is the growing demand for comfort and convenience. Customers are looking for seamless money transferring processes, easy to complete online operations, and this drives them closer to mobile banks.

Will fintech replace traditional banking institutions?

Following the DashDevs assessment, this remains unlikely in 2023. Traditional banks have been present in the industry for centuries and for online-only banking solutions to replace them it will take too much time. People still trust brick-and-mortar banks more in terms of security, however, it would be better for traditional banks to adopt fintech solutions.

How has fintech disrupted the traditional banks?

To put it shortly, fintech made everything in banking much easier and client-centric. It’s easier to take a loan or short-term borrowing since it happens faster, and you can do it from your phone. Tax payments can also be simplified with fintech solutions and take minutes instead of hours. Paperless and seamless operation of mobile banking attracts customers more than rigid traditional banks, thus disrupting the industry.

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