Are Fintech Companies the Same Thing as Banks, and Do They Work the Same?

You’ve likely heard of fintech and its power in our community, but you might wonder if fintech is taking over the world.

Fintech has dramatically enhanced how most people handle their finances and has offered opportunities that many consumers would never have seen; however, they primarily work in conjunction with banks instead of against them.

What is Fintech?

Fintech stands for financial technology. It’s available in many industries, including for consumers and businesses. It takes the place of many tasks humans used to do, including depositing checks, managing investments, applying for credit, creating budgets, and starting fundraisers.

What fintech isn’t a bank? Most fintech companies are apps or digital companies that partner with banks but aren’t responsible for the banking products themselves.

Fintech companies rely on today’s latest technology and are continually adding new features, whereas banks often have software and programs that are decades old.

How Does Fintech Differ From Banks?

Besides the obvious that fintech is on your smartphone or computer, and banks have either a brick-and-mortar location or an online presence to provide consumers with financial products, how else does fintech differ?

1. Fewer regulations: Banks are highly governed by the central bank and other authorities. There must be complete transparency between banks and their customers, and all regulations must be followed.
   Fintech companies don’t have the same regulations. While this may pose some risk, reputable fintech companies, like Waya, protect consumers’ information, use bank-level encryption, and ensure a customer’s safety.
2. Difficulty emerging: Banks are often ‘stuck in the past.’ Many banks haven’t updated their technology in decades, and it shows. Customers today want innovative ways to handle their banking, especially with smartphones in their hands 24/7. Banks that can’t provide this may lose to the competition.
   Fintech continually evolves, providing more convenient opportunities for consumers, so there’s no excuse not to save, invest, or handle everyday banking needs because it’s right at their fingertips.
3. Stricter guidelines: Banks have more at risk, so they tend to cater only to those with great credit or a lot of capital. Fintech, on the other hand, is open to people of many backgrounds, including those with bad credit or little capital, giving them the boost they need to start their financial journey.
4. Larger audience: Banks can only serve the people within their community or a reasonable distance. Online banks have a larger audience but are still limited to the areas where they’re allowed to do business.
   Fintech can do business almost anywhere. With the convenience of banking on your phone, fintech can be with you 24/7.

How Banks and Fintech Work Together

If you wonder if fintech is taking over the world, it’s not. Banks will still be around because they are the financial institutions that back most fintech companies.

When working with a fintech company, finding out who the partner bank is and researching them is important. Look at their ratings on the Better Business Bureau and their financial standings. See what they offer and ensure they use a program like Plaid to keep your information secure.

Final Thoughts

Fintech is the way of the world but in partnership with banks. It’s a way to make banking easier for people who otherwise might not have access and provide more convenience. Adapting to fintech can help you have more banking features and make your life easier!