The significance of developing new and innovative banking solutions have necessitated that the global banking sector becomes more technologically competent and incorporate the practices that were once strictly the domain of the Fintech startups (The Financial Brand). With the rising popularity of Fintech, and new and innovative solutions like Iban, traditional banks are forced to make their transactions and practices more efficient, digitize their products and services and overall improve their processes in order to cater to the changing needs and preferences of a time-starved and technologically savvy clientele.

Emerging trends like e-payments, m-payments, road advisors, cybersecurity and crypto-currency are threatening the prospects, as well as the existence of the traditional banking industry (Olshanetsky, 2017) and conventional banks and credit unions, have become more willing to integrate innovative banking services in their product and service portfolio. Even the traditional banking services – like bank deposits, cash deposits, capital investments, cash investment management and retirement saving plans – are moving towards a complete digital experience. New and advanced investment options like those offered by Iban and other Fintech start-ups, are offering convenient, profitable and easily accessible investment accounts.

Source: EY, A vision for platform-based banking, Pg.7

For more than a century, banks have fought to maintain full control of their entire value chain (Corradi and Peacock, 2019). Vertically integrated banks and financial institutions found the challenges of innovation, technology and the digitizing process incompatible with their old and outdated business model. However, with the rise of open banking and platform-based banking pioneered by the Fintech ecosystem, commercial banks are now realizing the importance of financial technology, mobile internet revolution and a broad array of technological interventions that are expected to transform the very fabric of the industry.

Fintech, a linguistic marriage of the two terms, finance and technology, is an up-and-coming financial sector development of the 21st century (Romānova and Kudinska, 2016). Fintech companies are businesses that integrate technology to develop and deliver new and better financial products and services for both individual customers and businesses. As competition from Fintech startups and platform-based banking continues to mount, commercial banks and traditional financial institutions need to reevaluate their vertically integrated banking model and incorporate innovative products and services for their customers (Albizzato and Wallace, 2019).

Fintech startups have begun to join hands with these traditional banks to integrate the ‘best of the two worlds’ in order to cater more effectively to changing customer demands and needs. In fact, fast-moving, forward-looking banks and credit unions are already in the process of combining the platform strategy with their own conventional platforms in order to offer a more unified and inclusive product portfolio. Some of the largest and more established banks across Europe and North America are currently involved in joint projects with commercial banking partners to introduce and establish Fintech divisions within their existing business model.

Platform-based banking overview

Source: EY, A vision for platform-based banking, Pg.11

As customer needs, habits and expectations continue to evolve, commercial banks and financial institutions need to develop and incorporate innovate new strategies to position themselves more favorably in the banking marketplace (Bricio, 2019). The new Fintech ecosystem has already begun to inaugurate new channels, new platforms and new banking products and services. The good thing is that these new developments do not require big budgets or heavy cash investments in infrastructure to upgrade to the new technologies. In fact, most of these capabilities and expertise are well within the reach of the commercial banking sector, allowing for these modifications to be attainable and practicable (Wallace, Albizzati and Raghavan, 2018).

Both Fintech companies and commercial banks are expected to gain from these joint partnerships. Fintech will build and power the technology products and services on behalf of their banking partners, who will, in turn, offer the former greater access to the mass banking marketplace. These joint efforts must take into consideration the behavioral transaction data, the various customer touch-points as well as tailored clustering solutions that will provide real value to final consumers.