For more than a decade, fintech startups have chipped away at the traditional banking model. What began with niche products — like mobile payments or peer-to-peer lending — has grown into a fundamental reimagining of the banking value chain. Fintechs now compete or collaborate across nearly every segment of financial services. Their influence is forcing incumbent institutions to rethink how they create and deliver value.
Historically, banks owned the entire customer journey. They provided checking and savings accounts, loans, investment products, and payments infrastructure under one brand. Fintech startups changed that dynamic. Instead of replicating banks wholesale, they targeted specific pain points, like faster onboarding, better user experience, or lower-cost transfers. They optimized around these pain points to address persistent, but specific problems.
The “Platformization” of Banking
This unbundling has redefined customer expectations. Fintechs like Revolut and Wise, for instance, built their success on transparency and ease of use. Customers now expect instant transactions, 24/7 access, and low or no fees. Traditional banks, constrained by legacy systems and regulation, have struggled to match that agility.
As fintechs mature, many are evolving beyond single-purpose apps, though. Some are building platform ecosystems that connect multiple services through open APIs. This trend is creating modularity within the value chain. Banks can now integrate third-party tools to enhance their offerings without building everything in-house.
Open banking initiatives in the EU and UK, and similar frameworks in North America, are accelerating this shift. Fintechs use open APIs to aggregate data and personalize services. They can also facilitate embedded finance, where banking functions are integrated directly into non-financial platforms. This gives customers seamless access to financial tools where they already spend their time, such as eCommerce platforms or ride-share apps.
Rebundling Through Collaboration
While fintechs initially thrived by unbundling, a new phase of “rebundling” is underway. Startups that once focused on a single vertical are expanding horizontally to capture more of the customer lifecycle. Neobanks are offering credit and investment products; payments providers are launching small-business banking services. The goal is to build ecosystem stickiness through integration and convenience.
At the same time, collaboration between fintechs and incumbents is increasing. Banks recognize that partnering can accelerate innovation while maintaining regulatory compliance. According to PwC, disruption from platforms and fintech companies is driving rapid technological changes across financial services, leading to increased mergers and acquisitions (M&A) as institutions seek to acquire digital capabilities. The result is a hybrid model that blends the trust and scale of traditional banks with the speed and creativity of fintech startups.
Fintechs excel at leveraging data to understand user behavior and offer contextual recommendations. Their analytics-driven approach enables them to personalize experiences at scale; something most banks are still working toward. That’s why the competition is now shifting toward data intelligence.
Artificial intelligence and machine learning are central to this evolution. Fintechs use these tools to detect fraud, automate compliance, and deliver predictive insights. Banks are following suit, but often face data silos and outdated infrastructure that slow progress. Strategic partnerships with fintechs can help bridge that gap and unlock the full potential of data-driven operations.
Strategic Implications for Incumbents
For established banks, the rise of fintech is not only a competitive challenge but also an opportunity to redefine their role. Instead of competing head-to-head on user experience, banks can leverage their strengths in capital management, risk assessment, and regulatory expertise. By adopting modular architectures and open data standards, they can participate in broader ecosystems rather than trying to own them outright.
The future banking value chain will likely be more distributed than hierarchical. Banks will serve as key nodes within networks of fintechs, technology providers, and non-financial platforms. Value creation will depend on adaptability, data collaboration, and customer trust.
Fintech startups are not simply reshaping the banking industry; they are reconfiguring what it means to be a financial institution in the digital age. For incumbents that embrace the change, the opportunity is not just to survive, but to lead.
