Banking has come a long way from the days of brick-and-mortar branches and paper-based transactions. With the advent of technology, the banking industry has been revolutionized, and today there are two primary types of banking solutions: classical banking and fintech solutions. In this blog post, we’ll explore the differences between these two approaches and the advantages and disadvantages of each.
Classical Banking
Classical banking, also known as traditional banking, is the established form of banking that has been around for centuries. It is characterized by physical branches, paper-based transactions, and a centralized system of governance. The core services of classical banking include deposits, loans, mortgages, and credit cards. Below you will find examples of classical banks in Estonia:
LHV Pank is a modern and customer-centric bank that has gained popularity in Estonia for its innovative digital banking solutions. It offers a range of financial products and services, such as current accounts, payment solutions, investment accounts, brokerage services, and business banking solutions. LHV Pank is known for its user-friendly online and mobile banking platforms, as well as its emphasis on technology-driven banking experiences.
Swedbank is one of the largest banks in Estonia, offering a wide range of financial services to individuals, businesses, and institutions. It provides savings and current accounts, loans, mortgages, investment products, and various banking solutions tailored to customer needs. Swedbank is known for its robust online banking platform and commitment to customer satisfaction.
SEB Pank is another prominent bank operating in Estonia, with a comprehensive suite of banking services for personal and business customers. It offers various banking products, including savings accounts, current accounts, loans, credit cards, investment services, and wealth management solutions. SEB Pank is recognised for its innovative approach to banking and focus on sustainable finance initiatives.
Coop Pank is a cooperative bank that focuses on serving the needs of its members and the local community. It provides a variety of banking services, including savings accounts, current accounts, loans, mortgages, and payment solutions. Coop Pank is committed to offering personalised service and supporting sustainable development initiatives, reflecting its cooperative values.
Advantages and Disadvantages of Classical Banking
The primary advantage of classical banking is that it is a tried and tested system that has been around for a long time. This makes it more stable and reliable than newer fintech banking solutions. Classical banking also provides a personal touch, as customers can interact with bank staff face-to-face and receive advice on their financial needs. The main disadvantage of classical banking is that it can be slow and bureaucratic. Transactions can take a long time to process, and there is often a lot of paperwork involved. Classical banking also tends to be less flexible and innovative than fintech banking solutions, as it is more focused on maintaining the status quo than disrupting it.
Fintech Banking
Fintech banking, or digital banking, is a newer approach to banking that relies on technology to provide services. Fintech banking solutions are typically offered by online-only banks or by traditional banks that have adopted digital technology to streamline their operations. The core services of fintech banking include online banking, mobile banking, and digital wallets. Here are some examples of possible solutions:
Revolut Business is a fintech platform that offers business accounts with a focus on flexibility and cost-effectiveness. Businesses can open multi-currency accounts, issue corporate cards, and access a suite of financial management tools through the Revolut Business platform. With features like instant payments, expense tracking, and budgeting controls, Revolut Business caters to the needs of modern businesses operating in a digital economy. Revolut offers:
– Account with IBAN of the European Union (Lithuania), accounts can be opened online with no opening or maintenance costs, company cards (both physical and virtual).
-Multicurrency account: More useful for companies that operate internationally, it allows companies to make and receive payments in more than 25 currencies (EUR, GBP, USD etc).
-Corporate Cards: You can create 3 physical cards (the first one with free shipping costs) and up to 200 virtual cards per employee. This way you can manage the company’s daily expenses, and if any member of the team has to travel, you can also track them in real time.
-Revolut Pay: Focused on e-commerce shops, it is a payment gateway that integrates with the main E-commerce platforms (Woocommerce, Shopify, Presta Shop), it allows you to accept credit card payments. On the other hand they also have the option of payment links to issue invoices and customers to pay by card.
Wise is a global fintech company that offers borderless business accounts for companies engaged in international trade. With Wise Business, businesses can hold and manage multiple currencies, make international payments at low exchange rates, and access real-time financial insights. Wise’s transparent pricing and efficient cross-border payment solutions make it a preferred choice for businesses with global operations.
Paysera Business is a fintech company that provides business account services along with a range of financial solutions tailored to businesses of all sizes. Its business accounts offer features such as multi-currency support, payment processing, invoicing, and financial management tools. Paysera Business is known for its flexibility, competitive pricing, and commitment to security.
Airwallex is a global fintech company that offers business accounts and payment solutions designed for international businesses. With Airwallex Borderless Accounts, businesses can hold and manage multiple currencies, make cross-border payments at competitive exchange rates, and access advanced financial tools for managing global finances. Airwallex’s platform integrates seamlessly with e-commerce platforms and accounting software, making it ideal for businesses with international operations.
Payoneer is a fintech company that provides cross-border payment solutions and business accounts for freelancers, online sellers, and businesses of all sizes. Payoneer Business Accounts allow businesses to receive payments from international clients and marketplaces, access funds in multiple currencies, and streamline global payouts to suppliers and partners. Payoneer’s platform offers features such as invoicing, tax solutions, and compliance tools to support businesses in expanding globally while managing their finances efficiently.
Advantages and Disadvantages of Fintech Banking
The primary advantage of fintech banking is that it is fast, flexible, and convenient. Transactions can be completed in real-time, and there is no need to visit a physical branch – everything is done online. Fintech banking also tends to be more innovative than classical banking, as it is focused on finding new and better ways to serve customers. Fintech banks tend to be less personal than classical banks, as customers typically interact with digital interfaces rather than human staff.
Conclusion
In conclusion, the comparison between classical banking and fintech reveals a dynamic landscape in the financial sector, where traditional institutions and innovative technology-driven companies coexist and complement each other. Classical banks, with their long-standing reputation, stability, and extensive range of services, continue to serve as pillars of the financial system, providing essential banking services to individuals and businesses. On the other hand, fintech companies leverage technology to offer innovative solutions that enhance convenience, efficiency, and accessibility in banking, particularly for digital-native consumers and businesses with specific needs, such as international transactions and online payments. While classical banks emphasise trust, reliability, and personal relationships, fintech firms focus on agility, innovation, and user experience. Ultimately, the coexistence of classical banking and fintech presents consumers and businesses with a diverse array of options, empowering them to choose financial services that best align with their preferences, needs, and priorities in today’s evolving digital economy.
