Fintechs and Digital Banks

Some fintechs have become digital banks. A Digital Bank is a financial institution that has a banking license, but unlike traditional banks they don't have physical outlets and only provide services through digital channels or via phones (mobile phones or landlines thru call centres).

A fintech is a company that provides financial services through technology, but it is not necessarily a bank, as a fintech does not need the license of a bank to provide its various services. The fintech term applies to companies that provide services traditionally provided by banks, like current accounts, wallet accounts, savings and credit. A fintech also can be a payment gateway, provide insurance products, or it can exclusively provide credit solutions, and so on. It will often do that normally by partnering with institutions that do have a proper license. We will discuss it as we progress in the module.

In conclusion, for a fintech to be called a digital bank, it must have a bank license, and it will tend to obtain such license only after it reaches a certain size of deposits, and customers which is mandated by its local regulator.