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Managing your money 28 August 2023

When traditional and fintech banking meet

In a world where speed of access is paramount, fintech banking solutions have attracted new generations of customers. But as regulatory requirements increase, easy access is giving way to unexpected hurdles down the line when regulators come calling.

Banking in the 21st century has come a long way from the days of analogue transactions involving physical interactions and antiquated methods of payment. The paper cheque, for instance, is a long-gone form of payment that for decades was considered the height of convenience in banking.

Today, digital services dominate the banking landscape, especially because fintech companies have ushered in a new era of digital convenience.

The appeal of an app-only banking service is easy to grasp, especially for digital nomads or people travelling or working abroad. Yacht crew, in particular, are often attracted to the convenience of banking on the go because they spend large parts of their time without access to physical banking services.

However, they don’t hold the exclusive claim to banking conveniences, with traditional banks offering increasingly digital journeys. The Standard Bank Seafarer account, for example, offers a fully digital onboarding process that simplifies account opening.

Traditional bank advantages

The features found in the Seafarer account are complemented by the benefits one can expect to get from a traditional bank. In a nutshell, these include:

  • Traditional banks have long-established reputations and trusted relationships with customers that newer fintech companies are still building.
  • Traditional banks are heavily regulated and offer meaningful consumer protections, including the Isle of Man Depositors’ Compensation Scheme*.
  • Traditional banks provide a wide array of services including current and savings accounts, debit cards, wealth management, and more, all under one roof.
  • Traditional banks offer dedicated customer service options, including call centres as well as online and digital channels to deal with complex issues or emergencies.
  • Traditional banks can typically handle a variety of international currencies.
  • Many traditional banks have partnerships with other financial institutions around the world, making international banking more seamless.

The convenience of fintech

There is no denying that mobile banking is convenient, which is why many traditional banks, Standard Bank included, offer mobile app banking. The big promise of many fintech offerings is the low barriers to opening an account.

These lower barriers sometimes also come with lower fees, and sometimes greater speed of transacting and innovative features like spending analysis, budgeting tools, and instant account notifications.

These are all valid and valuable features that help to simplify day-to-day transactions, and the life of account holders.

However, the one caveat to bear in mind is that not all fintech offerings are made equal, and often they cannot be compared on the same level as a traditional banks. Regulatory environments can differ greatly according to the registration of the company.

That is changing to some degree, with regulators starting to clamp down on fintech providers for shortcomings in verifying client details. One area of focus is the onboarding process that fintech’s often tout as simpler than those followed by traditional banks.

Commonly known as know your customer (or KYC), this is an integral part of global anti-money laundering efforts that place the responsibility on financial institutions to verify client details.

The fintech speed bump

This threat is becoming ever larger as regulators in the UK and beyond start to implement KYC regulations on fintech companies. As a result, some of their users are facing speed bumps when trying to transact if a file is not compliance with current regulations.

A speedy account opening experience can therefore be followed by inconvenient delays or lack of access to cash.

Bank on the best of both worlds

In the face of these threats, many of fintech users are also opening traditional bank accounts to complement the convenience offered by app-only banking services.

Sometimes referred to as the ‘hybrid banking’ model, this offers the security and reliability of a traditional bank, so you can rest assured your hard-earned salary is safe and covered by investor protection, and the ease of use of a fintech solution.

Typical ways to use these services in tandem is to designate a traditional bank as your primary service for receiving your salary and managing payments like debit orders and credit repayments. It makes sense to use your primary account for these transactions because they’re not needed every day.

The fintech offering, on the other hand, can be used for daily transactions where the speed and convenience simplifies life. Transferring a set amount every week, or every month, is also a useful way to manage your spending and stay within your budget.

The in-your-palm banking offered by fintechs is especially appealing for yacht crew who often don’t have a fixed address for long periods. That being said, there is also cause for caution if this convenience is threatened by regulators wanting to improve transparency and oversight.

The digital onboarding process for yacht crew who qualify for the Seafarer account, for instance, rivals many app-only offerings yet is fully compliant with all regulatory rules. This process involves simply uploading necessary documents and supporting information and completing a quick digital identity test.

Applying for an account and supplying the necessary information is a matter of minutes due to the seamless, automated onboarding process. Thereafter, no further checks are needed and you can bank as easily on the high seas as you can on the high street.

* Please refer to the Regulatory information | Standard Bank page of our website to find out more about the Compensation Scheme.