Various fintechs have emerged as key players in global finance in recent years, like the UK’s Revolut and Sweden’s Klarna. Whilst these firms have not yet fully taken on the dominance of traditional banks or new digital challenger banks, their impact is still undoubtedly disrupting the traditional space.
With Revolut firmly setting its sights on taking on more banking capabilities while various banks assess the investments they have made in fintech, Payment Expert spoke to senior executives at travel payments firm Swiipr, embedded finance firm Toqio and payments processor Blink Payment to gauge industry opinions on how the relationship between banks and fintechs will develop in 2025.
Payment Expert: How do you anticipate the relationship between banks and fintechs to evolve and will more UK banking licences to fintechs/neobanks help drive competition?
Ian Clowes, Co-Founder and Chairman of Swiipr: The chances of a new Revolut coming through in the B2C world to challenge the banks are slim, in my opinion. The reality is that, in the UK at least, bank accounts are something of a loss leader for banks. They offer them largely to secure customers for more lucrative areas of banking, such as mortgages.
That makes them very hard for neobanks and challenger banks to compete with, and there are few with the balance sheet backing needed to compete in this space. So, in the personal banking space I don’t see much competition ahead, though there may be more scope for new providers in the SME space. In areas where a lot of traditional banking branches have closed down, we are increasingly seeing fintechs come in to fill the gaps, some even with kiosks and physical banking facilities.
Outside the UK, especially in areas where consumers are not accustomed to free personal banking, there may be more opportunities for new competitors, especially in Africa, South America and the Middle East. The US could also see more development in this area as many banks are active in just one or two states and there are still thousands of mom-and-pop banks.
Eduardo Martinez, CEO and Co-founder at Toqio: While we have seen some fintechs being granted banking licences in the UK, we’ve also seen some of the so-called challenger banks come under fire, particularly on the customer service and fraud front.
Unlike some others in the fintech space, we do not necessarily see banks and fintechs as competitors because by and large, they serve different types of customers. In addition, the reality is that banks still have by far the largest balance sheets, and there are few fintechs that would ever be able to, or indeed even want to, compete with them on that front.
We see the evolution of the market as more of an orchestration play. In 2025, we think fintechs will play a larger role in bridging the gap between banks and corporates, with banks able to provide balance sheets fintechs can’t, but fintechs able to provide technology and integrations in a more nimble and agile way.
Ari Eder, Head of Product at Blink Payment: The UK government is going down a very consumer-centric route when it comes to stamping out fraud, placing a heavy burden on banks and payment firms in the drive to protect customers.
However, the recently introduced Payment Systems Regulator (PSR) rules did see the amount banks have to reimburse customers for push payment fraud introduced at £85,000, reduced from the previously proposed £415,000.
Some have speculated this lower limit might encourage more firms to apply for UK banking licences, but the real question is whether or not any will be approved.Most applications for UK banking licences are not approved and indeed, Revolut’s three-year battle for a UK banking licence was headline news in 2024.
The big barrier to more competition in the market is regulation – most fintechs, particularly start-ups, simply can’t meet the strict requirements of regulators. This is not especially surprising when we’re comparing companies that have been around for five years with institutions that have been operating for 50 years.
PE: Do you think banks are placing more and more value on working with fintechs or are they viewing them as competitors?
Ian Clowes: The area where I see banks being most interested in working with fintechs is in the B2B space rather than in B2C. Fintechs that are niche plays that provide a tailored service to a particular industry in a way a bank might never have the resource or inclination to do are likely to be the most desirable partners to banks.
Where fintechs cater to a very clear vertical in a way that adds value to an industry, I think banks will increasingly be very keen to work with them to ensure they stay relevant to that industry, therefore remaining in the frame for the lending side of their banking needs.
Eduardo Martinez: In the UK at least, a lot of the hype about fintechs taking over from banks was somewhat overstated, and the vast majority of lending in this market still sits with the big four banks.
Over the past five years we saw a lot of banks making big investments in the fintech space and coming up with API-based solutions, but in reality these didn’t get the take-up expected. Some banks also invested heavily in fintechs and ended up later having to write down their investments.
We think the way forward is going to be banks and fintechs working together rather than in competition. By utilising their different strengths, there’s a lot of potential to create new revenue streams and open up more opportunities for merchants and consumers, while also creating new profit pools.
Ari Eder: Whilst red tape may hinder new competitors from becoming licensed entities, on the flipside it also provides many opportunities for fintechs. Bureaucracy stifles most banks in terms of innovation, so there’s always going to be a need for more nimble and agile partners to fill the gaps in their offering.
Banks need the technology fintechs have to offer and fintechs benefit from the huge scale of banks’ customer bases, so partnerships between the two are increasingly being seen as mutually beneficial rather than competitive. I expect we will see more collaboration between banks and fintechs in 2025 as the improving economy and lower interest rate environment feeds through to both consumer and merchant confidence, and therefore a demand for more products and technology.
