FinTech and Community Banking: Built for Marriage?
Recent news of Prosper scaling back and OnDeck Capital’s ongoing losses has taken a little shine off of the FinTech apple. Doesn’t this happen with every meteoric rise?
Recently a former bank director and active bank stock investor asked me about the rise of FinTechs and how it impacts community banks. Here is my answer to him.
“I think technology firms are going to change banking forever. So if bankers that you talk to reminisce about the good old days when they could shake hands, make loans, and win relationships, run away.’
‘But the death of the community bank is exaggerated. Banks have customer trust. FinTechs have yet to earn it. Banks have customers. FinTechs want them. Banks have regulatory experience and regulators are now figuring out how to regulate FinTechs (good luck!). Banks have capital. Many FinTechs have sold to banks or seek investments from them (Note: I am on the advisory board to Hip Pocket that was currently cited by Finovate as a great prospect for bank strategic seed funding). Banks are FDIC insured. FinTechs are not. Banks have deposits. SoFi has none.’
‘Somewhere in between the two extremes of ‘ignore FinTech’, or ‘FinTech will rule the world’, will be the future for community banks. Collaboration between banks and FinTech firms has already begun, and I expect it to continue.”
How do you anticipate the future of these two industries come together?
Note: I am not a licensed financial advisor. So do not buy or sell stocks based on anything you read here. The government requires a test. Go to one of those folks.