What is Fintech Banking?

Fintech banking, short for financial technology banking, focuses on the integration of technology into financial services.

It uses advancements in artificial intelligence, blockchain, and mobile applications to streamline banking operations and customer experiences.

Unlike traditional brick-and-mortar banks, Fintech apps primarily operate online or through mobile apps, allowing users to manage their finances anytime, anywhere.

Keep in mind that many fintech apps aren’t legally banks or regulated as such. The fintech companies partner with banks or credit unions to hold your money and to extend FDIC or NCUA deposit insurance.

Who is Fintech Banking For?

These apps cater to a broad audience, including those who prefer robust mobile app access or people often excluded from traditional banking services.

Services Offered

FinTech banking includes basic banking services like savings and checking accounts and specialized services such as peer-to-peer payments, investment management, and lending.

Many Fintechs differentiate themselves by offering lower fees, early paydays,  budgeting tools, personalized financial insights, and round-the-clock customer support.

Fees

One of the appealing aspects of Fintech banking is its transparent fee structure, often devoid of traditional banking charges.

While specific fees may vary depending on the provider and services utilized, Fintech banks typically offer competitive or no-fee accounts, minimal transaction fees, and lower overdraft charges.

Pros and Cons

Pros

1. Convenience: Accessible anytime, anywhere through digital channels.
2. Cost-effective: Minimal fees and competitive interest rates.
3. Innovation: Cutting-edge technology enhances user experience and offers innovative financial solutions.
4. Financial Inclusivity: Broadens access to banking services, particularly for underserved populations.

Cons

1. Security Concerns: Increased reliance on technology may raise cybersecurity risks.
2. Limited Physical Presence: Lack of physical branches may deter those who prefer in-person banking experiences.
3. Regulatory Issues: Since fintechs aren’t banks they often aren’t bound by the same consumer protection laws.
4. Tech Dependency: Service interruptions or technical glitches could disrupt banking operations.

Are fintech apps considered a bank?

Fintech banks without a traditional bank charter typically partner with licensed financial institutions or obtain specific licenses to offer certain financial services.

Many Fintech apps collaborate with established banks and credit unions to provide banking services to their customers. The Fintech company leverages the bank’s existing infrastructure and regulatory approvals in these partnerships while offering its innovative technology and user experience.

This allows Fintech banks to offer savings accounts, payment processing, and lending services while the partner bank handles regulatory compliance and holds customer deposits.

Are deposits insured at fintech apps?

Depending on the regulatory structure and partnership arrangements, deposits at Fintech banking apps may or may not be insured.

Fintech banking apps partner with traditional banks to offer banking services. In such cases, the partner bank typically holds deposits.

If the partner bank is insured by the Federal Deposit Insurance Corporation (FDIC) in the United States, then deposits held at the partner bank would be covered by FDIC insurance, typically up to a certain limit per depositor, per account ownership category.

What’s the difference between fintech banking apps and traditional banking?

Fintech banking prioritizes tech innovation and digital experiences. Examples include Chime, which offers mobile-centric banking with early direct deposit, and Qapital, which provides savings tools. Neither of the examples are banks, but they partner with traditional banks for your deposits.

In contrast, traditional banking relies on legacy systems and brick-and-mortar branches. For example, while Bank of America offers online services, it may lack the agility of its Fintech counterparts.

Find the banking service that’s right for you in the marketplace.