Traditional banks have not lost their core function, but their competitive environment has changed radically. With the pressure of fintech players and neo-banks, today it is no longer enough to have capital, trust and a client base. The key question becomes how quickly banks can adapt to new customer expectations, regulatory requirements and technological changes. It is on this date that it is decided who will be the winner and whow will fall behind.
Banking has undergone a profound change in the last decade, but not so much in its core role as in the way it has to function in the digital economy. Clients still expect from banks what they expected before: safe payments, loans, savings and investments. But the market where these services are offered today is fundamentally different, marked by pressure from neo-banks, technology companies, increasingly stringent regulations and growing expectations around the speed and simplicity of the user experience.
In such circumstances, banks can no longer count only on size, trust and legacy position, but must demonstrate operational agility and technological readiness. In an interview with ICTbusiness Media, Bálint Fischer, Director of Business Development at Dorsum, explains why the real transformation of banking today is moving from the front-end to the backend, where artificial intelligence already brings measurable value, how regulation protects and hampers the market at the same time, and why the relationship between fintechs and banks is increasingly evolving towards a model of simultaneous cooperation and competition.
How fundamentally has the role of a traditional bank changed in the last decade, since digital-first experiences became dominant?
I would not say that the fundamental role of banks has changed significantly recently. Banks are still there to transfer money, approve loans, safeguard deposits, and help clients manage investments. What has changed significantly is the environment in which they operate.
Traditional banks are no longer just competing with each other. They face a new generation of challengers like Revolut, Robinhood and other neo-banks that have entered the market not as banks, but primarily as technology companies, with a clear tech-first approach and a strong focus on customer experience.
Client needs have largely remained unchanged. Users still want to pay, borrow, save, and invest. However, fintech players often offer simpler experiences in standardized segments like payments and card services. On the opposite side of the spectrum are more complex services with higher added value, such as housing loans, asset management or personalised advice. They are more difficult to disrupt and this is where traditional banks still have an advantage.
Banks rely on experience, capital, and an existing customer base, but they often struggle with legacy systems and lower operational agility. Fintech companies are technologically flexible, but they need to work on scaling, achieving regulatory compliance, and trust. We are witnessing convergence: banks are becoming more and more similar to technology companies, and fintechs are becoming more and more similar to banks. I am convinced that there will be winners and losers on both sides, and the winners will be those companies that effectively respond to new challenges and implement their strategy.
How do you assess regulation that, on the one hand, protects stability, but on the other hand, potentially hinders innovation in banking?
Regulation in banking has a dual role: it protects stability, but it can also limit innovation.
On the one hand, regulation preserves the integrity of the market, clients and the stability of the system. Deregulation can boost growth to a certain point, but subsequently increases exposure to abuse, poor governance and financial instability. Over the course of our 30 years in business, we have repeatedly seen how an overly regulated environment allows for problematic behaviours.
At the same time, overregulation reduces competitiveness and slows down innovation. When regulatory requirements are disproportionate, companies face rising costs and slower time to market, which weakens the attractiveness of a particular region.
A particular challenge in the EU is regulatory arbitrage. As licences can often be ‘passported’ between Member States, companies can often choose to operate under more lenient regimes while accessing more strictly regulated markets. In my view, this creates an uneven position: jurisdictions with higher standards may lose competitiveness without the risk being fully eliminated, as less regulated companies can still enter their market. This is an area that will need further work in the coming years.
Artificial intelligence is already deeply integrated into banking operations. Where does it bring the most tangible value today?
AI in banking can be viewed through two general categories: traditional machine learning (ML) based solutions and generative artificial intelligence (GenAI)-based solutions.
Machine learning has been present in banking for decades. It works best in highly structured environments where large data sets can be analysed. Typical use cases include fraud detection, anti-money laundering (AML), credit risk modelling, and transaction tracking. Such systems increase speed, accuracy, and security by identifying anomalies and predictive patterns in vast amounts of data. Of course, such solutions are constantly being improved, but they have been around for a long time.
Generative AI is more recent and enables the automation of less structured processes that are in most cases managed by humans. The most common examples of use include drafting a home loan agreement, managing iterative communication with clients, generating personalized investment recommendations, or compiling model portfolios. By helping to increase the efficiency of fragmented assessment-based workflows, GenAI enables banks to provide higher levels of service and a better customer experience. However, this process, in my opinion, is only at the beginning.
Over the next five years, many banks expect revenue growth without a proportional increase in capital and operating costs. This will only be possible if GenAI applications scale successfully.
Many banks have aligned themselves with neobanks in the mobile and front-end experience. Why is the real battle now being fought in the backend?
In the last 5 to 10 years, banks have focused on the front end. They developed better apps, offered a more enjoyable user experience, and introduced digital onboarding. This worked for a while, but now they realized that the bottleneck is clear that the bottleneck is actually the legacy infrastructure they use.
Today, the underlying systems of traditional banks are often rigid, non-modular, difficult to integrate, and have limited scalability and flexibility. This is not much of a surprise as many of these solution systems are 15 to 25 years old. These constraints are increasingly hampering banks’ ability to adapt quickly in a rapidly changing environment, even when banks use AI. For banks with rigid infrastructure, AI can only serve as a useful patch and not as a game-changing multiplier.
In order to be able to compete with fintechs on all fronts, banks increasingly need modern, cloud-ready, modular back-office systems based on microservices. Today, due to the limitations of outdated legacy systems used by banks, it usually takes 3 to 12 months to meet the needs of new customers. That is why banks are realizing that the improvement of the front-end part of the business was only the tip of the iceberg. What is typical of icebergs is that the top is their most visible part, while most of the ice is located below the surface. That is why it is now necessary to focus attention and that is why I think that the real work for banks is just beginning.
What problem are central banks’ digital currencies actually trying to solve from a banking and social perspective?
CBDC is often seen as a unique concept, but the two main types solve very different problems, so it makes sense to clearly separate them.
Wholesale CBDC focuses on interbank payments and settlement. Today’s infrastructure is based on complex, legacy architectures. A wholesale CBDC built on blockchain and DLT could modernize that layer, making settlement simpler and faster and potentially more affordable. In this sense, it is mostly a technological and infrastructural upgrade that could create significant value for all participants.
What most people mean when they say “CBDC” is retail CDBC. It is digital money issued by a central bank and held by citizens in blockchain-based digital wallets. At the moment, it is less about technology and more about monetary policy and macroeconomics.
The reason for this is that a retail CBDC would be a step towards a single-layer banking system, which raises key questions about deposits, stability, and the role of the two-tier system in use today. If such a retail CBDC model were to be introduced, the technology would become an important factor, but today economists are most qualified to assess its purpose and justification.
How has the relationship between fintech companies and banks evolved from disruptive to collaborative?
Fintech is an umbrella term that encompasses very different business models. The public focuses on big B2C players like Revolut, Nubank or Robinhood, but they make up a smaller part of the ecosystem.
Approximately 10 percent of fintech companies operate primarily on a direct-to-consumer (B2C) model. The remaining 90 percent are B2B providers of technology, infrastructure or specialized services for banks. For them, banks have always been natural partners, not competitors. In this sense, cooperation is not new.
What has changed is the scale and influence of leading B2C fintechs. The most successful among them (which I mentioned previously) have grown significantly and are now competing more directly with traditional banks for customers, deposits, and customer engagement, making the competitive dynamic more visible than before.
What does this balance between cooperation and competition look like today?
Financial services relies on a long and complex value chain, from infrastructure and compliance to user interface and product design. What we are seeing now is greater clarity about who wants to control which part of that chain.
Banks are increasingly making conscious decisions. In some areas, they want to develop and retain core competencies in-house, especially where scaling, balance sheet, and regulatory expertise are important. In other segments, they prefer to rely on specialized partners and integrate external solutions.
Fintech companies are natural collaborators at certain points in the value chain, while in others, especially in segments with direct contact with customers or higher margins, they are direct competitors.
Such dynamics are not specific to finance. In many service ecosystems today, companies can be partners on one level and competitors on another. The same logic today defines the relationship that is developing between banks and fintechs, and we can see that it is a mutually beneficial relationship for them.
The original interview was published in Croatian by Dražen Tomić in ICT Business
