Banking regulation: Banks’ secret advantage over fintech

By Veritran - March 30, 2021 - Category : Without category

As competition grows among digital financial services, banks can use regulatory compliance to their advantage to deliver greater security to clients

By Marcelo Fondacaro, CCO of Veritran

At a moment when disruptive startups have revolutionized the financial sector, it is time to ask what playing cards banks have in their favor.

As fintechs grow their share of the financial services industry, one question returns again and again: why can startups capitalize on changes and innovations in such a short time? One key part of the answer, which is often overlooked, is the lack of regulation.

The banking industry is heavily regulated, and these rules often slow the process of change at established institutions. However, banks can turn their traditional, experienced, and regulated profile to their advantage.

In fact, banks can gain more from credibility than they lose in agility. Plus, they can always catch up with fintechs through technology and innovation provided by tech partners (such as low-code platforms), mixed with their unique advantage: trust.

If we think about the context, fintech growth has accelerated over the past decade. Several factors have facilitated their rise but regulatory supervision of banks has been a key one - especially the heavy regulation set down on the global financial sector after the 2008 crisis. These regulations also drove up borrowing costs for consumers because of new lending restrictions. This, together with the intensification of the digital era and the massification of mobile devices, led to the rapid growth of fintechs.

Now, banks need to innovate, at the same time as they leverage the trust and loyalty which comes from being heavily supervised, secure institutions.


Banking regulation has always had clear objectives: to provide secure, safe operations, ensure stability in the financial system and protect consumers. Regulatory monitoring gives peace of mind to banking customers.

Going back to the 2008 crisis, many banks had insufficient asset and liquidity positions, which eventually required bailouts and mergers to survive. With the subsequent tightening of regulations, banks’ minimum capital ratios were raised, putting them in a better position to absorb losses.

Today, banks can turn their regulatory compliance into an opportunity to demonstrate the accountability and security they provide to their clients

Financial institutions are responsible for protecting not just their customers' money – but also their data. It’s something that clients value highly. In fact, 76% of Spaniards trust that their personal information is safe with their institutions, a percentage that rises to 83% globally, according to a study by the consulting firm Capgemini.

The survey also showed that 65% of consumers said that the trust an institution conveys, when it comes to safeguarding their personal information and protecting their transactions, is an extremely important factor when choosing a bank.

This does not mean that the thousands of fintechs that are emerging and expanding are less secure because of their novelty and speed, but in many ways, these new ventures can innovate more quickly because they are small organizations and are located outside the traditional system.


Banks, on the other hand, must take advantage of their situation within the robust and established system to continue generating value for their clients, who are looking for financial clarity to make informed decisions.

To offer a great experience, banks have a range of technological features that they can incorporate to deliver digital interactions at the level of Netflix, Uber or Spotify. These include both security and biometrics tools, which enhance the protection of their users, as well as usability tools, such as platforms to create simple and friendly interfaces and experiences for customers.

Keep in mind that winning is not always about doing something first – but rather about doing it best.

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