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  January 29th, 2025 | Written by

How Fintech Is Disrupting the Future of Retail Banking. 

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A report by the Daily Mail on October 13, citing data from the Office of the Comptroller of the Currency, revealed that 754 bank branches closed during the first nine months of 2024.

Read also: Revolutionizing Fintech: The Integration of AI in ERP Systems

This shift reflects changing consumer preferences, as more people opt for technology-driven solutions to manage their financial needs rather than visiting physical branches. Banks, aiming to cut costs and adapt to reduced demand for in-person interactions, are increasingly closing branches to enhance profitability.

This trend underscores how fintech is reshaping the retail banking landscape by prioritizing convenience, efficiency, and digital innovation..

But the growing use of financial technology isn’t the only reason for these closures. The low interest rates from 2020 through the first half of 2024 pressured banks’ profit margins, and labor shortages and increasing wages forced banks to review costs.

After transforming accounting by automating tasks like reconciliation management or assisting in the creation of a chart of accounts, fintech is now disrupting retail banking. We’ll look at three ways fintech is changing the face of retail banking.

Fintech is lowering the cost of banking

While legacy banks close physical branches at record levels to boost profits, fintech companies are now starting to operate virtual banks. With reduced initial expenses, these online-based banks provide traditional banking services at a reduced cost to the consumer.

Whether exchanging foreign currency or sending money via ACH or wire transfers, fintech means there’s no need to visit a bank branch to move money.

Wise, formerly Transferwise, allows customers to move money abroad cheaply and quickly. It has no physical branches, a robust technology platform, and a comparative skeleton team of just over 3,000 employees (for comparison, Wells Fargo has nearly a quarter of a million on payroll). 

With low operating costs, Wise can move money cheaper than Wells Fargo. If you wanted to send a wire transfer of $1,000 from a U.S. Dollar account to a EURO account, you’d pay just under $9 with Wise but $30 with Wells Fargo.

Source: Wise

Also, Wise lets you hold money in 53 different currencies with no monthly service fees. You only pay fees when you use your funds. 

Fintech is making information easily accessible with apps

We expect information to be delivered instantaneously. If a website takes more than a few seconds to load, we grumble. If our favorite streaming service is buffering, we roll our eyes and switch to the next one.

This same principle of speed applies to banking. Consumers are looking for access to their money at their fingertips. That means using online banking or accessing a mobile app.  

Services like Plaid allow people to connect financial data to apps like Venmo, Acorns, and Chime. Whether you’re building a budget, saving for retirement, or sending money to a friend, Plaid allows customers to connect their bank accounts to other financial apps. 

Fintech is offering services to fill gaps of traditional banks

Sole proprietors and workers in the gig economy find conventional retail banking is inflexible to meet their needs.

These customers aren’t large enough to need the complexity or expenses of business bank accounts. 

Chase Bank charges a minimum $15 monthly service fee for its Complete Checking account unless you can maintain a minimum $2,000 daily balance or make purchases with a Chase credit card. 

Instead, services like Lili offer sole proprietors accounts with no monthly fee, regardless of your balance or spending habits. 

Source: Lili

Also, Lili provides tax optimization tools with its app. It lets the customer easily classify expenses as business or personal with a swipe of the finger. Users can attach images of receipts to support business expenses. And at the end of the year, the app will automatically calculate your Schedule C showing your business income and expenses for your tax return.

And let’s revisit Wise. It provides practical banking solutions for world travelers or independent contractors working with clients in different countries. 

Wise lets customers receive money in 53 different currencies and convert it to one of the other 52 currencies. 

A freelance graphic designer based in the U.S. could invoice a Swiss-based client in Swiss Francs and get paid in Francs and immediately and cheaply convert it to U.S. Dollars without needing multiple accounts or multiple banks.

And Wise offers a Mastercard debit card that allows customers to access their account anywhere Mastercard is accepted.  

Traditional retail bank Bank of America doesn’t offer accounts denominated in non-U.S. Dollars.

While fintech platforms like Lili and Wise excel in providing streamlined services, they must also implement robust SOX compliance controls to ensure financial accuracy and transparency. These controls, such as rigorous data integrity checks, periodic audits, and internal reporting standards, help maintain trust and demonstrate accountability, especially as fintech companies handle sensitive customer transactions and data. 

The speed of adoption of new fintech and the acquisition of users has accelerated markedly. In 2022, it’s estimated that 80% of U.S. consumers used fintech to manage their finances.

A major change is now coming from digital disruption. This is leaving traditional retail banks with obsolete legacy technologies (e.g., mainframes) to serve the standards of service that new fintech companies can provide. Customers have new service expectations regarding user-friendliness of the interface, ease of use, and transparency.

Retail banking needs to adapt and implement financial technology to remain relevant.

Author Bio

Mike Whitmire, CPA*, is CEO and Co-founder of FloQast, a provider of accounting workflow automation software created by accountants for accountants to help them work smarter, not harder. Before founding FloQast, Mike began his career in audit at Ernst & Young, focusing on media and entertainment, before joining the accounting and finance team at Cornerstone OnDemand as the company prepared for its IPO. During his time at Cornerstone OnDemand, Mike first developed the idea for what would be FloQast.

A proud Angeleno, Mike is a big Los Angeles Dodgers fan and an avid baseball card collector. He resides in LA with his wife and daughter.