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Fintech in a Flash: Why Is Revenue Under Siege on So Many Fronts?

Dennis Jones
Oct 18, 2021

Most banks and credit unions are challenged to generate previous levels of revenue, much less meaningful increases, based on an array of industry-wide headwinds that are significantly impacting key revenue sources like interchange income, interest income, and non-interest income. The new and fierce competitive landscape is a fundamental contributor to these revenue challenges, with fintechs and big techs developing alternative solutions that disenfranchise banks and credit unions.

Why Are New, Fierce Competitors Such a Threat to Revenue?

Many of these innovators are now reinventing other channels like business and income payments and point-of-sale. Others are leveraging their brand equity and loyalty to further disenfranchise banks and credit unions by offering traditional financial services like deposits, loans, and cards – often with better digital experiences – to accomplish their ultimate goal of replacing financial institutions as the primary providers of financial services.

What Makes the Stakes So High?

Digital reinvention has also expanded a financial institution’s competition well beyond comfortable, physical markets. Consumers and businesses can now open new accounts or apply for loans in minutes with a credit union down the street, a bank across the country, or a fintech or big tech that is only an app away.

Banking as a Service (BaaS) also further threatens traditional banking asit will enable virtually any company in any industry to embed financial services into its customer experience. BaaS blurs the lines between chartered and non-chartered providers of financial services by enabling non-financial entities to use a financial institution’s secure, regulated, API-driven infrastructure to embed traditional financial services. These services can include things like payments, deposit accounts, and more that when combined, can create a curated customer experience.

But BaaS also provides growth opportunities and new recurring revenue streams for banks and credits unions that embrace it, develop supporting strategies around it, and implement the modern technologies that enable this emerging software distribution model.

Compounding these challenges even more, banks and credit unions are facing ongoing, increasingly complex financial management. 

How Your Financial Institution Can Overcome Industry-Wide Revenue Challenges

Technology has driven many of today’s revenue challenges. But technology can also be the solution for forward-thinking banks and credit unions. There are two crucial steps you can take to overcome revenue roadblocks.

  • First, embrace open banking and the need to become a platform. An open platform approach leverages APIs and provides absolute discretion over who you partner with, what solutions you integrate, and when.
  • Second, pick your platform partners wisely. With open banking widely considered to be the future of the financial services industry, if a potential partner can’t clearly demonstrate its open strategy, it lacks the future-ready vision you truly need.

For an expanded discussion on how you can respond both immediately and in the future, check out Overcoming Near- and Long-Term Revenue Challenges.


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