Revolutionising the financial industry. The role of FinTech banks in the digital age

Seminar paper from the year 2020 in the subject Economics - Finance, grade: 1,3, accadis Hochschule Bad Homburg, language: English, abstract: “Banking is necessary, banks are not”, Bill gates already stated in 1994. Internal factors, such as low margins and cost pressures, in addition to external factors, such as the financial crisis and the prioritisation of regulatory requirements, have alienated the banking sector from its customers. The traditional banking industry is increasingly obsolete and has failed to innovate over a long period of time. According to recent researches, traditional banks will not only lose 30% of its turnover; 76% are even afraid of losing complete parts of its businesses to FinTechs. Since 2015, the use of FinTech banks have risen strongly. This has shaken the foundations of traditional institutions, as well as the earnings model, due to the technology-enabled concept of FinTechs, without physical branches. Nevertheless, some researchers evaluate the financial reshape as sceptical, on account of the inherent risk of applying technology to finance. With regards to having a point of contact, surveys have shown that individuals, including young people, continue to attach great importance to the ability to have personal contact in a branch setting. Whether Bill Gates’ statement will take place in the next few years remains to be seen. The hypothesis that is tested in the following investigates present consumer preferences for financial services, main intensions for using FinTechs, as well as potential trust issues.