What’s Next For The European FinTech Market & The Rise Of Challenger Banks?

by | Jun 28, 2021

Ahmed F. Karslı, Papara CEO and Co-Founder

The past few years have seen an irreversible shift in the way the world banks. Whereas previously we depended on traditional outlets to support and manage our day-to-day finances, challenger banks are now able to offer consumers free-of-charge bank services at the touch of a button. Through technology, we are making money management as smooth and simple as possible, and are able to offer optimised service around the clock.

Indeed, this shift has been accelerated as a result of the coronavirus pandemic. When COVID-19 struck, the world became confined to their homes and banking followed suit – with a marked shift towards digital and contactless payments, many people who were previously sceptic began to rely on digital services to navigate a new cashless reality. The proof is in the data, with more than half of consumers (52%) saying they had increased their use of digital banking tools over the last 12 months. In emerging markets such as Turkey, this shift has been proportionately greater, as traditional banks previously required an in-person presence in order to open a bank account where other countries did not. At Papara the increase is clear: we’ve grown to over 9m users, with a large portion acquired during the pandemic.

So what can we expect to see moving forward?

As people continue to be socially distanced, the need for online services will continue. As such, fintech providers will have to continue to be agile and flexible, adapting to this new landscape while offering unrivalled user experience to cater for customers’ ever-changing needs in ways that traditional providers cannot. For example, we should expect to see AI transform financial apps as well as increased use of QR and remote payments.

As challenger banks become increasingly popular and trusted amongst the general population, there will be a greater expectation amongst traditional banking customers for the same innovation and flexibility provided by fintechs. We therefore expect to see a surge in strategic partnerships, where more technologically advanced providers will facilitate solutions for incumbents, bridging the gap between users’ needs and existing services and improving overall user experience. What’s more, as the proportion of challenger banks in the industry increases, we can also expect to see the focus shift for fintechs: so instead of competing with each other, they will begin to disrupt the traditional banking landscape more generally.

However, there is still a lot of work to do, and according to the World Bank, there are currently 1.6 billion unbanked people globally. In Turkey, 31% of the population are classed as being unbanked, meaning they don’t have access to the services of a bank or similar financial organisation. These underserved people are largely low income, lack the identification and documentation requirements to open a bank account and tend to live in rural areas far from traditional, in-person bank branches. Therefore, fintechs have the unique ability to welcome a new demographic to the financial system, making it a more equitable space and one that ultimately caters to the need of the broadest range of people. At Papara, this is at our core, and we are committed to providing financial freedom to the underbanked and underserved across Europe.

However, with the ongoing pandemic and its constantly evolving impacts, it is not yet clear exactly what the “new normal” of financial services will look like. While there has been extremely rapid growth and innovation in this space, the longer-term industry outlook is more difficult to predict. What is certain, though, is that the post-pandemic banking landscape will be very different from the one we knew before coronavirus – and one where challenger banks will play a key role.

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