In a far yet nearer future, banks and their customers will completely cease from having a direct bank-customer relationship with each other, or even physical branch offices, given the rise of fintech’s and neo-banks. Traditional banks, which still hold onto Neolithic methods of lending or account opening, will soon have very little to offer when competing in the digital lending space. Conventional banks already enjoy a great human resource, huge capital, database and a solid customer base; a customer base which they will eventually lose to the digital lending space. This is because most, if not all teenagers, once opened their bank accounts at a bank selected and preferred by their parents. Keeping in mind that shifting banks is such an uncomfortable act as it requires one to fully adapt with a particular banking system through ways such as filling of the bank’s applications forms, its cheques systems, loan application and approval requirements et al. This makes majority of the bank customers to continue staying put with their initial banks. However, having a large customer base stuck with you as a bank doesn’t in any way mean that the customers are comfortable. Most customers prefer fast, reliable and secure lending transactions rather than secure but lengthy ones. This is where the fintech and digital lenders have created their niche. It’s now much easier to access a credit facility or complete a partially hanging transaction by simply tapping on a mobile phone application. These mobile applications provide instant loan facilities to individuals and small businesses; something which could not have been profitably served from their respective banks. The fintech industry is moving fast so much that even establishing or coming up with laws and policies to regulate it is turning out to be quite the challenge. But technology waits for no man! In fact, the law basically tends to play catch up with technology. For instance, there are speculations around fintechs finally teaming up with banks to offer current accounts to individuals so as to ease e-commerce. Banks need to start understanding their customer base and what it offers their retail customers besides just storing, spending and borrowing money. It’s also a given fact that the banking industry is susceptible to fraudulent attacks on its database, by and large because most of the banking transactions, from opening customer accounts to credit facilities, may still require intensive manual processing and documentation involving costly intermediaries. Not forgetting that these transactions need to be validated by various participants at various points in time. However, to compete favourably with fintechs in the digital lending space, conventional banks need to continuously explore new and innovative ways of performing quicker and secure lending transactions to customers and generally promote the financial inclusivity of its customer base. This could nonetheless require them to adopt blockchain technologies, as the same can guarantee quick and predictable execution of transactions or simply team up with fintech companies to develop new synergies in the banking industry. The author is an advocate of the High Court
