Summarize please

In an article by LinkedIn, comparing FinTech and traditional banks, which can be considered commercial banks, they share that most FinTech companies' fees will be lower (Ragapay, 2023). These lower fees can be attributed to these companies having lower overhead costs (Ragapay, 2023). Other than the cost of their software, these companies do not operate in typical brick-and-mortar locations and provide their services to customers online. This will largely decrease costs compared to commercial banks. The four commercial banks we have looked at have thousands of locations across the United States. FinTech companies do not serve customers in the same way, in online platforms there is no need for customers to visit physical locations. FinTech companies can also get more competitive rates, as they are not exclusively with one bank. This can be seen with mortgage apps, as consumers will go to their bank and receive only one rate, mortgage apps can compare different lenders and find the best rates for their consumers. FinTech companies are also able to make money differently than commercial banks. In FinTech, money can be made by offering more premium services in the form of subscriptions, transaction fees, advertising, referral programs, and selling their software to other companies (Khanna, 2023). These revenue streams and lower costs allow for cheaper services. For example, apps like Venmo now charge 1.75% for instant bank transfers of funds. Other apps, like Robinhood, are a no-fee stock investing app. If one were to traditionally invest with a bank there are fees associated with that. Commercial banks make most of their money from spreads, which is the difference between the interest rate on the loans customers receive from banks and the interest rate the banks pay to the customers on their bank deposits (State of Connecticut Department of Banking, 2023). Banks can also make money from the interest that is received from the securities they own, service charges on accounts, and any other additional services they provide (State of Connecticut Department of Banking, 2023). From a strictly financial or cost standpoint, FinTech services are overall cheaper than commercial bank services. Even though Fintech is cheaper they do not offer all the services that commercial banks offer, which will sometimes cost more.

When looking at performance, FinTech can have much more efficient performance as they have automated processes and highly developed software. FinTech was developed to make transactions more efficient and smoother for customers or business. Many times, commercial banking branches and ATMs may be less accessible in more rural areas (Ragapay, 2023). FinTech is able to combat this issue with online platforms that can be accessible anywhere. Commercial banks also offer more services that are personally tailored to businesses and customers which include investment and wealth management (Ragapay, 2023). Even though FinTech is developing rapidly they do not have teams of workers providing these services to their users. FinTech uses platforms that are very easy for users to understand, which comes from their software working in the background. As mentioned above, apps like Venmo allow friends and families to send money to each other with the touch of a button, Rocket Mortgage allows users to enter their information and instantly gives them rates and mortgage payments, and Robinhood is a no-fee app that allows for easy investing and trading. Most of these apps also have chatbots that can answer user questions within seconds. Commercial bank processes often take longer but normally their services are more personable and tailored to the consumer. From a point of pure efficiency, FinTech is more suitable, but they do not offer large investment management for large businesses or wealth management. Banks offer more personal experience and human interactions making them more trustworthy. When consumers use a commercial bank, they are not entering all their information into online platforms and are working with a business that has been around for a very long time with a good reputation. Even with Fintech's advantages it is a newer industry, people generally trust banks with larger transactions and holdings as well as more personal information. It can be seen in many other sectors where people are hesitant to trust newer technology or embrace it. For example, newer technology like self-checkout at stores faces a lot of backlash.