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David or Goliath. Who will win today?

New-age technology brought in by banks & fintechs in challenging well-positioned incumbent banks. David or Goliath. Who will win today?

The legend of David and Goliath depicts the fall of the unbeatable. Goliath of finance, the incumbent banks are now being challenged by challenger banks. Who will win today?


Once upon a time, there was a big giant named Goliath whom everyone feared. No one dared to challenge him. However, one brave shepherd boy, named David, challenged Goliath to a fight.

Goliath made fun of David for David had no weapons while the mighty Goliath was trained in sword fighting and wrestling. What David lacked in physical strength was made up for with the strength of his determination. David aimed his slingshot on Goliath’s head, right between his brows and with a single shot of a pebble the giant dropped to the ground.  Despite of his mighty size, his shiny full-body armour, his spear and sword; the giant faced defeat at the hands of a small boy.

This fable depicts the downfall of the unbeatable. The moral that it holds is relevant in today’s turbulent world, especially in the finance industry. Small, recently incubated Financial Technology firms are giving well established financial institutions a run for their money.

Banks are aware of the disruptions and are looking for new methods to increase their own capacities as technology breakthroughs cut the cost of updating legacy systems. They have reached a tipping point where they must consider a digital transformation and re-strategize to keep their place in a highly competitive market.


How are the Davids of finance challenging the Goliaths?

Deloitte report of 2020, identified ways in which challenger banks are causing disruptions in the finance industry and what traditional banks can do to come at pace with them.


Unique User Experience

When I say ‘bank’, what pops in our minds is trips to the bank branch, long queues, wait-time for services like money transfer. Neo banks and Financial technology firms jumped on such friction points to provide unmet and underserved needs of the customer such as on-the-go payment services, instant account opening, 24/7 customer support etc.

Challenger banks provide digitally focused, seamless customer experience that the new-age, digitally native customers desire. This has helped them acquire a significant customer base around the world.

Large financial institutions planning complex multi-year technology transformation efforts may need to reprioritize where to focus in order to ensure the features and services customers value the most are expedited into production.


Lower Cost

Banks focus on serving their existing customers. However, Neo banks place an emphasis on acquiring new clients. They do this by providing a simple product with service fee close to nil to attract and appeal to customers.

For instance, most European banks often impose a currency conversion fee ranging from 1% to 3% of the purchase amount in addition to a predetermined cost per foreign currency transaction. Challenger banks, on the other hand, provide foreign currency exchange at zero cost for card use regardless of currency.

The expectations of customers are evolving. Along with the trust and legacy of incumbent banks, customers are also looking for new services and offerings. Banks will have to find a way to optimize costs and pass along those benefits to the customers. Technology platforms like Fable’s Growth Suite could help banks with the necessary agile infrastructure to compete with the neobanks.


Real-time offerings

The distinct advantage that neo banks have is that they are not tied to legacy systems and have the ability to adapt and scale their operations. Well established financial institutions are providing unique services to improve the overall user experience.

However, these improvements are layered over old legacy systems. The core systems do not work in real-time. This is a major disadvantage in a market where new players, with their agile infrastructure and real-time offerings, are taking ever-larger market share.


Agile Infrastructure

During the pandemic, incumbent banks struggled to adapt to the work-from-home culture. Brick and mortar branches are key to their infrastructure. However, challenger banks enjoy a flexible cloud-based setup that can be scaled according to their need.

Over the next decade, we would see the rise of new technology, the evolution of new regulations, and demand for newer services. Banks need to rethink their strategies and restructure their setup to be able to adapt and re-adapt to such changes.



Legacy issues are proving to be a roadblock for banks and financial institutions. However, banks are now better equipped to transform and adapt. A mutually beneficial relationship with FinTechs could help banks navigate the turbulent waters of the payments industry. If you need help to make your presence in the digital banking ecosystem, consult our cross-border payment solutions experts here.

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