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The distinction between banktech and fintech is becoming increasingly blurred, forcing banks to rethink their strategic positioning.
As embedded finance, generative AI, and real-time payments transform the financial services ecosystem, banks must decide whether technology partners are enablers or potential disruptors.
Banktech or Fintech?
Banktech: Enhancing from Within
Banktech refers to technologies that enhance banks’ internal capabilities, such as AI-driven fraud detection, improved credit underwriting, real-time payments, and regulatory compliance solutions.
In this model, banks remain the primary actors while technology firms provide the supporting infrastructure that enables them to serve customers better and operate more efficiently.
“Banktech makes banks the stars, with technology as their production crew,” says Nathan Baumeister, CEO of ZSuite Tech.
This contrasts with fintech, which emerged initially as a supporter of banking but has evolved to compete directly through neobanks like Chime and Current or non-bank lenders such as Affirm and Klarna.
These firms bypass traditional institutions by offering seamless, direct-to-consumer experiences, reshaping customer expectations and eroding banks’ competitive advantages.
Fintech: From Supporters to Competitors
Today’s competitive landscape defies neat categorisations.
Hybrid models are on the rise, with fintechs acquiring banking licences, banktech platforms enabling fintechs to launch consumer-facing services, and AI-native start-ups simultaneously selling solutions to both banks and fintechs.
This convergence creates ambiguous alliances, with many partnerships amounting to little more than tactical truces.
As a result, banks risk empowering firms that could soon emerge as direct competitors.
Embedded Finance: Trojan Horse or Opportunity?
Embedded finance exemplifies this strategic dilemma.
Once viewed as a promising opportunity for partnership, it is increasingly functioning as a Trojan horse.
Non-banking platforms such as Amazon and Shopify integrate financial products to strengthen their ecosystems, effectively relegating banks to the role of invisible back-end providers while capturing the most valuable element – customer relationships.
Georgina Merhom, Founder and CEO of SOLO, argues that while fintechs excel at rapid transactional conversions, banks retain deeper structural advantages, including low capital costs, established risk management expertise, and durable customer trust.
The key is using banktech to translate these advantages into digital capabilities that can counter fintech’s agility.
Strategic Challenges for Banks
For banks, embedding banktech strategically requires honest internal assessment.
This includes evaluating whether core banking systems can support AI tools, instant payments, and other emergent technologies, while also optimising existing tech stacks to reduce technical debt and avoid inefficient spending.
Identifying impactful use cases for automation that enhance operational efficiency without causing major disruption will be critical.
Equally, integration must be seamless to avoid adding complexity rather than improving services.
However, choosing the right partners demands rigorous due diligence.
Banks must move beyond simple compliance checklists to ensure potential collaborators are financially sustainable, possess credible investors, and can adapt to fast-changing regulatory demands.
Partnerships built on clear expectations and shared long-term goals will always yield stronger results than transactional vendor relationships.
As Big Tech firms like Apple and Google deepen their financial services offerings, and AI-native entrants such as OpenAI and Anthropic explore banking use cases, the competitive landscape will only become more complex.
Banks must ensure they are not inadvertently enabling competitors under the guise of innovation.
Ultimately, those institutions that can clearly distinguish between strategic enablers and potential disruptors – and deploy banktech as a means of deepening customer relationships rather than simply digitising transactions – will define the next era of banking.
Their success will lie not in adopting technology for its own sake but in wielding it strategically to shape their future rather than becoming mere infrastructure in someone else’s ecosystem.
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