TechFin: A threat to FinTech?
FinTech startups have been disrupting the financial industry in recent years, but times change quickly – and now the same companies have begun looking over their shoulder in fear of a new set of potential rivals.
In our previous article, we talked about how TechFin is the latest challenge in the financial industry, and why it shouldn’t be confused with FinTech – despite the confusingly similar names. We now take a closer look beyond their basic differences, focusing on why TechFin is not a threat to FinTech – but might even be a potential for partnership.
Different customer bases
FinTech largely targets the same customers as other financial institutions, drawing in new customers with more streamlined options for financial services.
In contrast, TechFin is not directly trying to replace existing bank processes for customers. Most TechFin companies have a large user base already, and do not try to lure potential customers away from the financial services market.
Although TechFin companies provide financial services on their front-end,they will usually let a licensed financial institution process the actual transactions. This way, TechFin businesses can avoid the regulatory hurdles and other requirements imposed upon financial institutions, while still providing their users with world-class services on their platforms.
Ultimately, a TechFin company’s target audience is its existing users. A technology business in TechFin seamlessly slots financial services alongside the other features that its users can access, thereby providing more reasons for customers to stay on one platform and complementing the overall user experience.
Benchmarks for success
The differences between FinTech startups and TechFin platforms go beyond service type and customer base. The two groups of companies also have very different business models.
The goals of TechFin companies revolve around engagement levels and data. By providing financial services on their platform, TechFin companies can keep users on their platform for longer periods of time. Increased time spent on the platform means more user engagement, more opportunities for paid advertisements, and more user data gathered for monetization.
As with most technology businesses, TechFin companies collect user data to analyze consumer behavior and spending habits. This same data can be used to create better customized services, or sold for a profit to other companies. In some cases, data monetization can be more lucrative for TechFin companies than the returns from the financial services themselves.
For FinTech companies, on the other hand, user engagement alone does not guarantee profit – or even survival. FinTech platforms aim to attract customers who will open accounts and use their financial services. Even if a FinTech platform adds new high-tech features that encourage their customers to use their platform for longer periods of time, if customers do not make any financial transactions, the Fintech platform will have failed to increase the value of assets under its management. …?
In this respect, FinTech has much more in common with other banks and financial institutions than with TechFin. Although FinTech companies use cutting-edge technologies and digital infrastructure, the overarching measure of their success is about increasing their assets under management, just like traditional banks.
Innovation through partnership
TechFin is more than a threat for FinTech to understand and compete with. In fact, TechFin companies can be great potential collaborators for FinTech businesses.
A FinTech startup can boost customer success by pairing with TechFin companies to create a platform that is attractive and user-friendly. By offering in-depth data analysis and detailed consumer insights, a TechFin partner can help a FinTech startup make financial transactions as easy and enjoyable as the TechFin partner’s features.
Meanwhile, a TechFin company might prefer to pair with a financial institution that is more aligned with their technology-centric approach. When choosing a partner in the financial industry to provide payment services to their users, a TechFin company can work more efficiently with a FinTech startup that is technologically fluent. For a TechFin company, a FinTech partner’s main advantage is its ability to swiftly adapt payment models that suit the needs of users in the TechFin sector.
A FinTech partner can also help a TechFin platform offer financial services that are innovative and exciting for its users. FinTech startups are constantly seeking new ways of doing financial transactions in order to challenge the ‘old-fashioned’ services of the industry, such as blockchain utilization and cryptocurrency trading.
Ultimately, businesses from both sectors can help each other attract and retain consumers – while continuing to innovate the financial industry.
It’s all about perspective
Although similarly named, TechFin is not here to uproot FinTech’s spot in the financial sector. As a group of technology companies, the TechFin sector has different customers, operations, and goals than Fintech.
Not only is it possible for TechFin to peacefully coexist with FinTech, but both can benefit enormously by working together to push their respective services towards a more digitized customer friendly future. By building new partnerships between the two sectors, both TechFin and FinTech can help each other attract and retain consumers – while acting as twin catalysts for change in the financial industry.