Financial Technology Start-ups: Disruptions and Bank Strategies

This report provides a comprehensive overview of the FinTech landscape, focusing on the emergence of start-ups and their disruptive impact on the traditional banking sector. It begins with a critical discussion of the FinTech landscape and identifies major players like PayPal and Google Pay. The report then evaluates the significant threats posed by these companies to established financial institutions, analyzing how they are changing customer behavior and expectations. Key areas where banks are experiencing disruptions in their traditional intermediation functions are examined, including payment systems and consumer expectations. Finally, the report explores strategies banks are employing to reposition themselves and thrive in the face of digital disruptions, such as the development of mobile applications and net banking services. The report concludes by summarizing the key findings and emphasizing the ongoing evolution of the financial technology sector.

Financial Technology Start-
ups

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
A. Critical discussion of Fintech landscape and its major players.........................................1
B. Critical evaluation of the major threats of these FinTech companies that are faced by other
financial companies................................................................................................................2
C. Key areas where banks are facing disruptions in their traditional intermediation functions
................................................................................................................................................2
D. The way in which banks are repositioning themselves to be net-winners from digital
disruptions amongst others.....................................................................................................3
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
Financial technology is termed as FinTech which is a new innovation in finance industry and it is
replacing current and traditional methods of financing. Now a days all the organisations are
using FinTech to enhance all the activities in finance. All such type of companies that are related
to it are competing with bank by making banking easy for the customers (Boh, De-Haan and
Strom, 2016). Various topics are being covered under this report such as discussion of FinTech
landscape and major players of it and critical evaluation of major threats that these companies
pose to other entities. Apart from these key areas where banks are facing disruption and the ways
that are adopted by banks to the bet winners are also covered under this assignment.
MAIN BODY
A. Critical discussion of Fintech landscape and its major players
Fintech landscape is the innovation or alteration in existing financing activities. Main
purpose of them is to provide new experience to the customers and facilitate them to make
transactions in appropriate manner. Now a days new and innovative features are adding in
financial technology in order to make the life easy for clients and make banking and other
financial activities easier. Traditional methods of exchange are being replaced by FinTech as
people find it easy to use and effective. All companies that are related to it depends upon internet
and if it is not working then it not possible for them to deliver services to clients. With the help
of it, customers can use financial services on low cost and make transaction easily without
visiting a financial institution. Banks are very expensive as compare to them so people are
switching from bank to such FinTech as they think that it is an easy and cheap way to receive or
pay money (Chuen, 2015). All of them can be connected with bank accounts and then
individuals make transactions with the help of it and does not require to visit a bank. There are
various types of FinTech that are used by people in different regions. All of them are as follows:
PayPal: It is the most successful and famous FinTech all around the world and it is used
all around the world. Parent company of it is Ebay. Founder of PayPal are Elon Musk, Peter
Thiel, Max Levchin, Ken Howery, Luke Nosek and Yu Pan. It is mainly used in United States
and its headquarter is in San Jose, California, U.S. People use it to make online payments,
transfer money and serve an easy and paper less alternative to banking activities. It was
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established in year 1998 and since that year it is being used in U.S. and slowly it has started to
grow and being adopted by individuals who are from different countries.
Google Pay: It is a new start-up of FinTech which was introduced by well recognised
company Google. The company announced that it is the combination of its different digital
payment methods. It is a type of digital wallet which can be linked to the bank account and then
people can make transactions with the help of it. It is mainly used in Asia and now the company
is trying to expand business in Europe and still working on it (Kato, Okamuro and Honjo, 2015).
Both the above described FinTech are used by people in order to make their banking
easy. Profitability of such companies is continuously increasing and these are attaining higher
monetary viability as compare to banks such as HSBC, Bank of America etc. Business of such
financial institutions is getting affected due to alternatives such as Google pay and PayPal.
B. Critical evaluation of the major threats of these FinTech companies that are faced by other
financial companies
Business of FinTech is continuously increasing and all of them are affecting banks. It is
vital for banks to identify risks that are posed by these FinTechs and formulate appropriate
strategies to deal with them. All the risks are as follows:
Hinge of giving customers: As all the FinTechs are growing massively and it is affecting
business of banks and customers are not preferring to go banks and make transactions but they
always try to use them and ignore banks. It is resulting in decreased customer engagement in
banks and decreased profitability.
Changing the way of people of thinking regarding banking: FinTechs are changing
thinking of people regarding banking and making them addicted to them. Customers are
switching from banks to them as they find easy to use.
Both the above described threats are resulted by FinTech that may affect banking
organisations because customers are getting less interested in banks and preferring different
FinTechs such as PayPal and Google Pay.
C. Key areas where banks are facing disruptions in their traditional intermediation functions
There are various areas where banks are getting disrupted in their traditional banking functions
due to FinTech (Laudon and Traver, 2016). All of them with examples are as follows:
Payment system: People are choosing FinTech to make payment and they does not prefer banks
for the same. It is the main area where banks are getting disrupting due to them. For example,
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customers always try to make easy payments in less time but if they visit banks then they have to
wait in que and other paper work is required. In the case of FinTech they do have to face such
challenges so people choose them rather than banks (Pilkington, 2016).
Consumer expectations: Main expectation of customer is to use banking in easy manner
and use all the financial services easily. Banks are not able to fulfil them so individuals are
preferring FinTech where they do not face issue that they have to deal with in banks. For
example, customers want to reduce paper work and make transactions earlier but banks are not
taking action against this. Now it is resulting in decreased preference to them.
Competitive market: Competition in the banking sector is continuously increasing due to
FinTech because customers find it easy to use and cheap mode of paying and receiving money.
For example, clients always try to spend less time in making and getting payments from different
sources but time involved in banking processes is very high so they are switching to other
options. As it is capturing market share of banks so it is also called competitor of them (Key
areas where banks are facing disruption, 2019).
All the above described key areas where banks are facing disruptions in the traditional
intermediation function between payee and receiver. Expectation of customers always increases
with time because they always want more and more in order to fulfil all their needs that are
related to different banking sector services.
D. The way in which banks are repositioning themselves to be net-winners from digital
disruptions amongst others
As FinTech is affecting banks so now they have started to find ways to reposition them with the
help of digital medias. Now all the banks are launching their personal mobile application and
providing net banking facilities so that people can make transaction when ever and where ever
they want. In this digital application all the customers are required to link it with their bank
account and use all the services of banks any where they want. It was a new and innovative idea
which was chosen by banks to reduce negative impact of FinTech. Banks also started to provide
net banking ID and password to the account holder while operating bank account so that they can
use it and enjoy all the services at their home, office or the place where they visit. In order to
increase number of customers banking sector companies have also started different types of
scheme in which they provide coupons that could be redeemed by customers while using their
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mobile application of net banking (Wright, 2014). It is very beneficial for banking sector
companies because it results in increased customer traffic and retention rate of them.
CONCLUSION
From the project report it has been concluded that FinTech is the new technology which is
affecting banking sector by providing new experience of banking to the customers. There are
various types of FinTechs that are attracting people towards them from banks. These are Google
Pay and PayPal. All of them are vary successful brands that are utilised by people to make and
receive payments. These are affecting business of banking sector by creating risks and threats for
banks. Now a day’s banks are trying to reposition them by using digital media such as mobile
applications.
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REFERENCES
Books and Journals:
Boh, W. F., De-Haan, U. and Strom, R., 2016. University technology transfer through
entrepreneurship: faculty and students in spinoffs. The Journal of Technology Transfer.
41(4). pp.661-669.
Chuen, D. L. K. ed., 2015. Handbook of digital currency: Bitcoin, innovation, financial
instruments, and big data. Academic Press.
Kato, M., Okamuro, H. and Honjo, Y., 2015. Does Founders' Human Capital Matter for
Innovation? Evidence from J apanese Start‐ups. Journal of Small Business
Management. 53(1). pp.114-128.
Laudon, K. C. and Traver, C. G., 2016. E-commerce: business, technology, society.
Pilkington, M., 2016. 11 Blockchain technology: principles and applications. Research handbook
on digital transformations. 225.
Wright, M., 2014. Academic entrepreneurship, technology transfer and society: where next?. The
journal of technology transfer. 39(3). pp.322-334.
Online
Key areas where banks are facing disruption. 2019. [Online]. Available through:
<https://www.digitalistmag.com/industries/2015/08/27/4-top-challenges-facing-
banking-industry-right-now-03352186>
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REFERENCES
Books and Journals:
Online
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