Published : 2 years ago, on 29/07/2022

Kenny Tsang, Managing Director of FinTech Unicorn PingPong Payments, discusses how forward-thinking businesses are paving the way for collaboration between banks and fintechs. 

Not many industries have experienced such a rapid disruption over the last few years the way banking has. In fact, according to a report by the Economist Intelligence Unit (EIU), 65% of executives believe the branch-based banking model will be outdated in five years’ time. One thing is certain for banks and traditional financial institutions: they must be innovative in order to gain, and most importantly, retain customers.

With the future of banking being technology-driven, financial technology organizations have stepped in equipping the industry with tools that make it more efficient than ever before. Fintechs are becoming the customer experience imperative, as they have given rise to lower operational fees, API-enabled tools, and accessible cross-border payment, helping SMBs around the world gain midmarket velocity, without mid-market headcount.

By combining the latest technological developments with financial services or applications, fintech can help businesses deliver better financial services to companies and individuals alike.

Breaking into new marketplaces 

One of the main challenges traditional banking methods face when dealing with international buyers is agility, as the worldwide average time taken to pay a supplier reaches 66 days. Extended processing periods for small business invoices can often delay businesses from breaking into global marketplaces, inhibiting international expansion.

Cross-border payment flows are predicted to reach $156 trillion in 2022, meaning it is time for banks to take payments to the next level. Cross-border payments can be slow, expensive, and take several days to complete, so the question remains: how can we take cross-border payments to the next level?

Fintechs are changing payments expectations by reducing costly foreign exchange fees and wire charges, and manual taxation processes that traditional banks use. By doing this, fintechs are not only helping to streamline operations, but also creating new and enhanced experiences that are demanded by clients. The world moves faster than the processes banks can offer, whereas, setting up a virtual bank through an automated payments provider can be done in minutes. The customer experience is enhanced further, as the user interface of all in one platforms allows clients to have control of every payment they make.

Virtual bank accounts can provide instant reconciliation capabilities that allow for real-time payments transfer anywhere in the world. Today, an end-to-end ecosystem of cross-border transactions has become critical to international success.

Partnering to move the industry forward

According to an EIU survey, 38% of banks are innovating through investing in or acquiring fintech startups, while 24% report participating in sandboxes to test new propositions. Banks have historically struggled to fulfil the requirements needed for funding suppliers, as well supply chain components, and international sales. Because of this, there is a common misconception that banks and fintechs can only be rivals.

Despite the competitive nature of banks and fintechs, forward-thinking businesses are paving the way for collaboration. Rather than independent solutions, all-in-one payments providers can offer a seamless banking experience with platforms that automate VAT, taxation and payroll processes. These added capabilities arm businesses with operational savings that can be reinvested into their global expansion plans, boosting profitability and reducing stagnation.

The pandemic triggered further digitalization in the financial sector. The number of physical interactions has decreased, and organizations are increasingly opting to arrange their financial needs online. This has caused a shift in expectations, with customers demanding more seamless and specialized experiences, requiring a transformation of the entire financial ecosystem.

Moving forward, businesses that want to maintain competitive advantages should be on the lookout for all-in-one payment providers with a track record of adaptive business models. They should search for a comprehensive payment solution with the ability to deliver payments faster, convert currency at a cheaper rate to improve the overall efficiency of their backend payments processes and facilitate the personalization consumers have come to expect.