Authors: MARIA ARETI SPILIOPOULOU, Evangelos Manouvelos

Title: Financial Technology: friend or foe? Will FinTechs reconstruct the banking system?

Abstract

In recent years, investments in financial technology experienced a significant increase. FinTechs are those companies that use new technologies and innovations in order to enhance or replace existing financial services. They create flexibility through new services that do not have the same cost structure, bureaucracy or technical debt as in the banking system. Their success is based on their ability to innovate and develop more simple and attractive offers to customers.

FinTech services can differentiate into many areas: banking and insurance (InsurTech),

business processes (payments, investments, financing), targeted customer groups (retail, private, corporate),

B2B, B2C or C2C services, and management systems. Banks are forced to compete with startups and FinTech companies

in order to improve their offers and update their systems. The development of FinTech services pushes banks to become more efficient,

more personal, cheaper and easier to use. Banks’ answer is to focus on specific areas that need immediate improvement, while trying 

to create ground for cooperation with Fintech companies and startups.

Yet FinTechs are currently profiting from the trend around digital 

customers and new technologies, a smaller regulatory burden 

and the banking system’s "legacy burden". All these cases might 

change. FinTechs are also obliged to develop advanced analytics and 

algorithms in order to manage and dare any kind of fraud, since total 

digitalization of services may result in more credit, market 

and operational risk. 

Despite these issues, banks need to be open to new solutions and

 learn from FinTechs' working methods. Digital innovation is a priority

 and FinTechs create challenges and opportunities in the financial

 industry.