Banks Feared Fintechs. Now Fintechs Need What Banks Have

For years, fintechs challenged traditional banks with faster technology, simpler digital products and better customer experiences. Now, the lines are blurring as fintechs pursue banking capabilities and established financial institutions adopt the technology that helped their challengers gain ground.

This convergence reflects a broader shift in financial services. Global fintech investment reached $103.1 billion in the first half of 2026, even as deal volume declined, signaling greater investor selectivity and a focus on scalable business models, according to KPMG. Members of the Senior Executive FinTech Think Tank examine what this changing landscape means for financial institutions competing on technology, trust and customer value.

The question is no longer simply whether fintechs can become banks or banks can become more like fintechs. It is which companies can combine the strongest capabilities of both to deliver better financial products and experiences.

“The question is increasingly less about who can become a bank and more about which institution can serve customers most effectively.”

– Bhanu Matta, Director of Data Science at Intuit

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Speed Is No Longer Enough

Bhanu Matta, Director of Data Science at Intuit, sees one of fintech’s original advantages narrowing as banks catch up technologically. His perspective comes from data science and financial technology, where the ability to turn data into better products and experiences is increasingly central to competition.

“For much of the past decade, FinTechs’ edge was simple: They could ship products and features faster than traditional banks,” Matta says. “But advances in AI over the past two years are rapidly narrowing both that advantage and the gap with incumbents.”

That convergence changes the competitive equation. If banks can increasingly match fintechs on speed and digital capabilities, fintechs need another reason for customers to choose them.

Matta points to three structural challenges fintechs have faced: liquidity and regulatory concerns without a banking licence, the absence of physical branches and limited social proof.

“FinTechs have also faced three structural headwinds: concerns over liquidity and regulation without a banking licence; the absence of physical branches; and, most importantly, limited social proof—the reassurance that comes from seeing people in your own circle use a product,” Matta says.

That last factor is particularly relevant because financial discovery increasingly happens online. Research from the Federal Reserve Bank of Philadelphia found that 38% of adults ages 18 to 35 use social media for financial advice, compared with 4.5% of people ages 56 and older. The research illustrates how digital financial behavior is becoming normalized among younger consumers.

Matta says social media is helping fintechs overcome some of the familiarity gap.

“That is changing. The rise of finfluencers and financial content on social media is helping normalize FinTechs,” he says.

But greater visibility does not eliminate the need for trust. Instead, it raises the stakes around whether financial companies can translate attention into useful, credible products.

“Trust and regulation remain critical, but the focus is shifting,” Matta says. “Banks and FinTechs are investing heavily in customer segmentation and tailoring features to specific groups.”

That leads to a more useful definition of the competition. Rather than asking which category—bank or fintech—will win, financial leaders should ask which institution can understand a specific customer segment and serve it better.

“The question is increasingly less about who can become a bank and more about which institution can serve customers most effectively,” Matta says.

“The future isn’t ‘banks vs. fintech.’ It’s regulated financial infrastructure combined with fintech-level technology.”

– Allen Kopelman, CEO of Nationwide Payment Systems Inc.

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Banking Infrastructure Has Become an Asset

If fintechs once looked at banking infrastructure as something they could work around, the industry is increasingly proving that infrastructure matters.

Allen Kopelman, CEO of Nationwide Payment Systems Inc., has spent more than two decades working in payments. His company serves businesses across the United States, including retail, restaurants and hospitality, B2B and wholesale, e-commerce, SaaS platforms and regulated or complex payment environments. That gives him a practical view of the intersection between financial technology and the infrastructure businesses depend on.

“Banks spent the last decade worried fintechs would replace them,” Kopelman says. “Instead, something more interesting happened: Fintechs discovered that banking licenses, deposits, compliance, risk management and trust are incredibly valuable.”

The shift is also reflected in fintechs’ pursuit of banking licenses. Reuters reported in March 2025 that fintech and cryptocurrency companies were seeking charters to gain access to banking capabilities and support their growth.

The realization does not mean fintechs have lost their advantage. It means the definition of that advantage is changing.

“Meanwhile, banks realized fintechs were right about one thing: Customers expect faster onboarding, better technology, APIs, automation, real-time data and a much better user experience,” Kopelman says.

The regulatory side of that convergence is becoming increasingly visible. In 2025, the Office of the Comptroller of the Currency conditionally approved a fintech business model for SmartBiz Bank, demonstrating that fintech-driven models can enter the federal banking system while remaining subject to the same rigorous standards applied to other new entrants.

Kopelman sees the result as less of a battle between two categories and more of a combination of strengths.

“So who’s winning? The companies meeting in the middle,” he says. “The future isn’t ‘banks vs. fintech.’ It’s regulated financial infrastructure combined with fintech-level technology.”

That principle extends beyond consumer banking into payments, where businesses increasingly expect multiple capabilities to work together rather than managing disconnected financial tools.

“We’re seeing the same shift in payments,” Kopelman says. “Businesses don’t just want a processor anymore. They want payments, ACH, invoicing, integrations, APIs, automation, reporting and support—all connected.”

The lesson for financial leaders is to stop treating technology, regulation and customer service as separate competitive categories. The strongest offering may be the one that makes all three work together.

“The winners won’t be the companies calling themselves banks or fintechs,” Kopelman says. “They’ll be the ones solving the customer’s problem best.”

“Fintechs have the advantage of being nimble and responsive to the needs of the tech-savvy generation.”

– Banu Raghuraman, AI Lead Product Manager at Perficient

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Banks Need to Hear What Customers Are Saying

Banu Raghuraman, AI Lead Product Manager at Perficient, approaches the shift from the customer experience side. She has more than 15 years of experience building customer experiences and software solutions, primarily in fintech, payments and healthcare, including mobile banking, real-time payments and conversational intelligence.

Her view is more direct: The industry should not mistake fintech’s rise for a branding problem. It’s a response to what customers are asking financial institutions to change.

“Fintechs are emerging as a better option, not necessarily as an identity crisis, but more so of traditional banks gaslighting the feedback the customers are explicitly giving,” Raghuraman says.

The criticism calls out an important distinction. Banks may have the infrastructure and regulatory credibility fintechs increasingly want, but that doesn’t automatically mean they have solved the customer experience problem that created the opening for fintechs in the first place.

“Fintechs have the advantage of being nimble and responsive to the needs of the tech-savvy generation,” Raghuraman says.

That generation is also navigating economic pressures that can make traditional financial products feel increasingly disconnected from everyday realities. The Federal Reserve Bank of Philadelphia reported in 2026 that younger renters were among the groups experiencing notable declines in financial security and homebuying intentions.

Raghuraman believes context matters because customers are not simply looking for another financial product. They want institutions that understand the conditions in which they make financial decisions.

“This generation does not need another hand in their pocket that is also walking a tightrope around red tape,” she says.

Her broader challenge to traditional institutions is to become more responsive and competitive rather than relying on established advantages.

“The fundamental purpose of helping the customers make money with money is also lost when we think about the not-so-competitive products offered by traditional banks,” Raghuraman says.

Her prescription is straightforward.

“So, I think the trad banks have to do a lot better in becoming lean, competitive and empathetic towards the current generation, rather than just looking at their traditional metrics of making money,” she says.

That puts the identity question in a different light. Fintechs may want bank licenses because banking infrastructure creates valuable capabilities. Banks may want fintech technology because customers have demonstrated that speed, simplicity and responsiveness matter. Neither side wins simply by becoming more like the other.

They win by using those capabilities to deliver something customers actually value.

What Financial Leaders Should Do Next

• Combine fintech speed with banking-grade infrastructure. Customers expect faster digital experiences without sacrificing trust, security, compliance or reliability.
• Compete on customer outcomes, not industry labels. Whether a company calls itself a bank or fintech matters less than whether it solves a customer’s financial problem effectively.
• Build products around specific customer needs. Better segmentation and personalization can help financial institutions move beyond generic products and compete on relevance.
• Treat trust as a core capability. Regulation, liquidity, risk management and credibility are not obstacles to fintech innovation; they can become competitive assets when integrated into the customer experience.
• Make financial services feel less complicated. Faster technology does not matter as much if customers still encounter unnecessary friction, confusing products or excessive red tape.
• Use technology to strengthen the entire financial relationship. Businesses increasingly want payments, data, automation, reporting, integrations and support to work together rather than operate as disconnected services.
• Measure whether innovation improves the customer experience. Adoption and growth are useful metrics, but customer satisfaction, retention and the ability to solve real financial problems reveal whether technology is delivering value.

The Identity Crisis Is Becoming a Convergence

The bank-versus-fintech debate is becoming less useful as the two models increasingly borrow from each other. Fintechs are discovering that licenses, deposits, compliance and trust have strategic value, while banks are recognizing that customers have come to expect the speed, personalization and digital experiences fintechs helped popularize.

That does not mean the distinction between banks and fintechs disappears. It means the strongest financial companies may be the ones that stop treating the distinction as the primary source of competitive advantage. The next phase of financial services will be defined by companies that can combine regulatory strength with technological agility and customer empathy—and prove that combination creates better outcomes.