Fintech: When Customers Regulate Banks 


Whether Amazon, Airbnb or price comparison websites: In many industries, digitalisation has shifted power to customers in the last ten years. The banking industry, however, has remained resilient against radical changes for a long time. In fact, things like digital transparency and the power of small private customers do not fit into the traditional self-image of banks. Yet, from a customer perspective, the question is:

What have the banks done in the last few years to improve the lives of their customers?

Although most banking services can be used online today, the services haven’t changed at all – not even esthetically.

ATM Money BankingATMs, for example, look today just as they did twenty years ago. Customer-oriented product design? Not a relevant category for most banks.

In fact, Banks have never been more unpopular than today.

Customers don’t trust so-called “innovations” provided by an industry that has brought them little benefit, but has plunged them into a major financial crisis instead.

As a result, urban trendsetters, and other customer categories previously shunned by banks, have moved closer to “non-banks”, where appearance and customer focus are more up to date and authentic.

These young tech companies from the financial world – mostly referred to as ‘Fintechs’ – are the expression of the new power customers hold in the financial sector. Customer empowerment is visible in several ways: First, Fintechs offer simpler, quicker and more easily accessible financial services – be it transfers, credits or mobile payments. Even more important, from an economic and social perspective,  is the fact that Fintechs give many people, who were previously excluded, access to financial services.

Based on sophisticated scoring models lending marketplaces, for example, give loans to start-ups, employees or students, who are commonly considered as “risk groups” by traditional banks.

Bank of WhateverAccording to a recent study by PricewaterhouseCoopers, up to 4.3 million additional people in Germany alone will be able to realise their entrepreneurial, professional or private projects via online lending. With the EU property loan policy making the middle class’ access to home ownership significantly more difficult, now access to credit and equal opportunity go hand in hand.

Due to their transparency and promise of inclusion, Fintechs rise above the ponderous smugness of the banks and open up the prospect of a fairer financial system.

The competition from these young technology firms reduces customers’ dependence on banks while limiting the banks’ power. Moreover, they are an effective remedy against the too big to fail logic, which largely underpins public distrust in banks since the financial crisis of 2008. As failures in the peer-to-peer system can no longer be passed on to tax payers as a whole by using the threat of a bank collapse, in the Fintech ecosystem, private investors carry both the chances for high returns and the risk of impairment for individual loans failing.

So, what is the role of banks in the future?

Dinosaur BankThey will most likely still be around in 2025, albeit in a smaller role, particularly in retail banking: They will primarily provide the regulatory infrastructure and handle various supporting processes.

Most banks will merely act as a dumb pipe, providing backend processes to other financial service providers, like many telecommunication companies today. The new players however will take over the product creation part and will be the ones who will be dealing with the customer.

My thesis is: Fintechs will end up becoming a kind of regulatory system for the banks by rule of the market.  What lawmakers haven’t been able to achieve, will now be accomplished via digitalisation: the limitation of the power of banks.

The financial world is set to become a fairer, more liberal and at the same time more stable place. In the end, the financial sector will be getting its revolution after all, without riots and street fightings, but driven by a young, digital generation of entrepreneurs.


andreas-barthelmessAndreas Barthelmess is an Executive Adviser of leading FinTech companies. Previously, Andreas has held executive positions with iZettle and auxmoney.  Furthermore, Andreas is an economist and member of the Club of Rome.


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