Banks increasingly find their businesses challenged by fintech startups that often look to attract new customers by undercutting banks with free or low-cost services. These newer players typically provide such cheap financial services, such as Venmo’s free peer-to-peer payments or neobanks like Chime that charge no overdraft or foreign transaction fees, in order to later monetize the user data they collect.
Banks now must face a future where traditional revenue sources — like transaction processing fees — could dry up as customers flock to low-cost fintech offerings.
To compete in this future, banks need to take a page out of the fintech playbook and explore new revenue sources built through data monetization. While this can seem like a risky prospect for financial institutions in an era rife with privacy concerns regarding personal customer information, taking this step is important for maintaining future profitability.
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