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Deutsche Bundesbank President Jens Weidmann recently said that FinTech requires more regulatory oversight because of its potential to threaten financial stability and the banking sector, but some believe this isn’t the case.
In a report from PYMNTS, FI.SPAN’s founder and CEO, Lisa Shields, is reported as saying that the FinTech sector can help banks out and boost their commercial B2B business.
According to the report, the business commercial banking segment is worth $1.85 trillion worldwide. However, banks are reported to have estimated that around $500 billion of that sum is expected to be removed by third parties or FinTechs over the next five to seven years.
Of that $500 billion figure, a significant portion is expected to come from paper payments that have moved into electronic form.
What Needs to be Done?
According to Shields, API in banking is what’s needed; however many businesses may not necessarily use API, but API is what many FinTech company’s use.
For large banks surveying the FinTech scene, this may seem like an attractive option for banks who want to work together and improve their capabilities.
For it to work, though, both sides need to figure out how they fit together that makes sense to both parties involved.
Banking and FinTech
The debate surrounding banking and the FinTech sector is not going to abate anytime soon.
For banks, more needs to be done for them to understand the benefits that the sector can have on it.
This is despite reports that the FinTech sector could reduce those in banking institutions by at least 20 percent in the next ten years, even possibly up to 50 percent.
Yet, as Mark Carney, the governor of the Bank of England recently said, while FinTech poses risks it also promises great things for consumers and businesses.
At the Deutsche Bundesbank G20 conference on “Digitizing finance, financial inclusion and financial literacy” in Wiesbaden, Germany, last month, Carney is reported as saying that there will be more choice, better-targeted services and improved pricing for consumers through FinTech. Small and med-sized businesses would have access to new credit.
Banks would also profit from FinTech with lower transaction costs, stronger operational resilience and better capital efficiency.
What stood out from his speech, though, is that people within the finance sector would be better empowered, connected, and informed.
With such a hole looming that banks could potentially lose to third parties over the next five to seven years, it would seem that the banks have nothing to lose by working with FinTechs.
Featured image from Shutterstock.