As digital convenience becomes more prevalent, non banking financial providers are purposefully designing their strategies to suit the changing customer needs, and beating traditional banks at their game.
Outpacing offerings available from traditional incumbents, neobanks, digital payment apps, and other non-banking financial companies (NBFCs) are racing ahead of traditional banks. The biggest deciding-factor, and a prerogative for legacy players in the banking industry was trust. But this is no longer enough.
With the ability to provide services at a much faster and more convenient method, users are inclined towards non-bank players. Can they change the game for the BFSI sector worldwide, and will traditional banks be able to keep up?
In Europe, neobanks are outperforming legacy banks. A report showed that Atom Bank saw app downloads increase by 101%, Viva Wallet by 54%, Tandem Bank by 53%, Monzo by 49%, Revolut by 31%, and Metro Bank by 28%. Meanwhile, legacy banks did not gain as many Android downloads as neobanks in 2022. In fact, European and UK legacy banking apps were down by 1.5% in 2022 as compared to 2021.
NBFCs are also looking to partner with businesses to help them start their fintech journey with just a push of a button. A recent report revealed that 66% of retailers are investing more resources to expand convenient payment and checkout options for their customers, and NBFCs are all ears to it, resulting in a spate of partnerships globally.
PayPugs, an online payment solution provider, recently joined forces with neobank Muniy to roll out a global fintech as a service solution to help the UK and European businesses integrate financial services into their products.
The offering includes features such as easy API integration, different web and mobile interfaces, various transaction types, and IBAN accounts, which can be tailored to unique customer preferences. The tie-up will help businesses launch their own fintech product fast, cost effectively and under a single system
Oslo-based FinTech Neonomics recently launched its online checkout solution in Finland after offering it to ecommerce merchants in Norway. The new checkout product will take open banking to the next level by allowing businesses to add open banking to their payment options using a few lines of code.
Indian ecommerce company Lenskart partnered with Razorpay. Indranil Chakravarty, Chief Business Officer at Lenskart, said, ” As a brand with a multichannel presence and transactions conducted with direct-to-consumer and business-to-business partnerships, we needed a transparent and reliable payment gateway to lead the business transactions in all our retail environments.” With this association, Lenskart aims to simplify the online payments process for its customers and expects a rise in its online customer base in the coming months.
BoomerangFX tied up with Stripe to enable integrated payments within its clinic management platform. Users can experience faster payment processing, increased security and omnichannel payment options.
Mercedes-Benz has begun using Visa technology to enable native in-car payments. Powered by Visa’s Delegated Authentication and Visa Cloud Token Framework technology, Mercedes pay+ will debut in Germany. In using the payments option, users can pay for a range of digital services and shop for connected-car offerings.
Meanwhile, tech giant Apple Pay recently contacted retail staffers and offered them a test version of the service, which will allow shoppers to split the payment for purchases into instalments. Called Apple Pay Later, the BNPL service will run on a new financial platform, Apple Financing LLC, that the brand has designed for in-house initiatives.
Although the tech giant is jumping into the fast-growing financial market to mark its own territory, it is collaborating with banking groups as well. The team is developing Apple Pay Monthly Instalments in partnership with Goldman Sachs Group Inc., which will split up the cost of large transactions over several months with interest.
While payment technology in business tech stacks becomes increasingly important, the costs and complexities have also seen a spike. Global digital payments revenue is expected to reach $14.79 trillion by 2027. Pagos, a payment intelligence company that allows businesses to optimise their digital payment infrastructure and maximise revenue and lower payments costs, recently announced an oversubscribed $34 million Series A investment. Pagos launched composable payments intelligence and action tools for businesses’ existing payments processing infrastructure.
Additionally, experts reckon that blockchain technology, especially Web 3.0, can perhaps offer more convenient, faster, and affordable mobile banking services, as it does not depend on middlemen evaluating counterparty credit risk. Web3 payment systems can remove time-consuming redundancies and minimise the associated costs due to the security and transaction verification distributed over a decentralised network of computers. Web3 transactions are also encrypted.
Do banks stand a chance?
Indian fintech unicorn Slice acquired up to a 5% stake in North East Small Finance Bank. But does it help the bank? From Amazon Lending to CRED and Groww, NBFCs are also offering loans at almost the same interest rate but at a much faster pace. It’s high time traditional banks rearticulate their value proposition, and upgrade their business tech, data and CX stack.
It’s imperative that banks approach the retail industry as their priority market and develop an innovative digital platform that supports the full search, shop and manage value chain of the retail sector.
Moreover, a focus on making customers’ shopping experiences easier with embedded transitions within customer journeys can be a definitive first win towards achieving a competitive edge. Then, they wouldn’t have to just be a storage locker.