Banks have long stood at the centre of the financial system. Their influence goes beyond balance sheets and branch networks. The real power of banks lies in how they shape credit, control infrastructure, influence regulation, and determine who gets access to financial tools and capital.
Despite the rise of fintech, banks still play a central role in the economy. They hold deposits, extend loans, process payments, and connect financial markets. They also maintain relationships with governments, corporations, and regulators that fintech firms cannot easily replicate.
But the nature of that power is shifting. Technology, regulation, and changing user expectations are altering the balance between banks and challengers. In this article, we explore how banks hold power, how that power is evolving, and what the future may hold.
Banks Power: Gatekeepers of Credit
One of the clearest expressions of banks’ power is their role in credit allocation. Banks decide who gets loans, on what terms, and for what purpose. This affects everything from home ownership and business growth to financial inequality.
Banks assess creditworthiness using internal models, regulatory guidelines, and risk policies. They have access to detailed financial data, including historical banking behaviour and collateral profiles.
This gatekeeping role can be conservative. Many banks avoid lending to small businesses, younger borrowers, or those without formal employment. This leaves gaps that fintech lenders try to fill.
Still, banks benefit from access to central bank funding and deposit insurance. This allows them to lend at lower cost and scale quickly. Fintechs cannot easily match this level of balance sheet power.
Until access to credit becomes more open and decentralised, banks will continue to shape who can participate in the economy.
Control Over Payment Infrastructure
Banks control much of the world’s payment infrastructure. Whether it is card networks, interbank transfers, or settlement systems, banks sit at the heart of the pipes that move money.
Most payment systems are layered. Even if you use a fintech app to pay someone, that transaction often settles through a bank-controlled network. The bank holds the account, processes the funds, and clears the transaction.
Central bank systems such as the UK’s Faster Payments or the US’s Fedwire rely on banks to distribute access. This limits how far fintechs can go without partnering with incumbent institutions.
Banks also influence fees, transaction speeds, and service availability. Their dominance in payment infrastructure reinforces their central role, even as user interfaces change.
Fintech may improve the experience. But banks still control much of the flow.
Regulatory Influence and Policy Access
Banks play a powerful role in shaping regulation. They have the scale, legal expertise, and institutional ties to engage directly with policymakers. Industry associations, lobbying groups, and working groups often include banks but exclude startups.
This gives banks a voice in drafting rules, defining standards, and interpreting compliance expectations. It also allows them to shape the competitive environment.
While fintech firms push for innovation, banks often push for clarity, risk reduction, and barriers to entry. Some of this is justified. Banks are systemically important and highly regulated. But the result is an uneven playing field.
The ability to influence policy is part of banks’ institutional power. Fintech firms must work harder to gain a seat at the table.
Banks Power: Trust and Brand Legacy
Power is not only technical or legal. It is also emotional. Many people trust banks because they have used them for decades. They recognise the logos, understand the products, and believe their money is safe.
Banks benefit from this legacy trust, especially in times of crisis. During market shocks, users often move funds from fintech platforms to established banks. Perceived stability matters.
This trust gives banks pricing power, customer stickiness, and political leverage. Even when their technology lags, their brand equity keeps them relevant.
Fintech firms must work harder to earn this trust. They rely on design, transparency, and responsiveness. Over time, some may surpass banks in user loyalty. But legacy power is hard to dislodge quickly.
Deposits, Capital, and Systemic Power
Banks hold enormous deposits. This gives them capital to lend, invest, or manage liquidity. Central banks backstop them through lender-of-last-resort functions and deposit guarantees.
This access to capital is a key source of power. It allows banks to weather downturns, fund long-term loans, and absorb losses. It also gives them leverage in commercial negotiations and partnerships.
Fintechs often rely on external investors, fee revenue, or white-label partnerships. This limits their resilience and flexibility in comparison to banks.
Systemic banks are also seen as too big to fail. This implicit guarantee reinforces their influence over markets and governments. While controversial, it is a fact of the current system.
Capital is not just a balance sheet metric. It is a tool of strategic power.
How Fintech Is Shifting the Balance
Fintech is not replacing banks. But it is changing the balance of power. Fintech firms now control many customer relationships. They set user expectations and drive interface standards.
Fintech apps attract younger users, underserved populations, and digitally native businesses. They introduce competition and pressure banks to modernise. They also enable new products, such as microloans, fractional investing, or embedded finance.
Infrastructure fintechs reduce banks’ control over technical rails. API platforms, open banking protocols, and cloud-native architectures allow anyone to build on top of financial data.
Fintech may not yet have the capital or political clout of banks. But it has captured the imagination of users. That, too, is power.
The Rise of Bank-Fintech Collaboration
Increasingly, the future is not banks versus fintech. It is banks and fintech. Many banks now partner with fintech firms to improve onboarding, underwriting, KYC, or user engagement. They invest in innovation labs, join fintech accelerators, and acquire promising startups. This collaboration creates mutual benefit. Banks get speed and fresh ideas. Fintechs get scale, credibility, and infrastructure.
Still, tensions remain. Some partnerships are superficial. Others are structured to maintain control rather than share power. For the model to work, trust and shared incentives must improve. When done well, bank-fintech collaboration can shift power towards better outcomes for users.
Banks Power: A New Era of Accountability
The power banks hold also brings responsibility. Customers, regulators, and the public expect them to support sustainable finance, financial inclusion, and ethical data use. Environmental, Social, and Governance (ESG) criteria are shaping bank strategies. So is pressure to support local economies, reduce systemic risk, and invest in digital literacy.
Banks that ignore these shifts risk losing relevance. Those that embrace accountability may redefine what banking power means in the twenty-first century. Banks still hold enormous power. In infrastructure, capital, regulation, and influence. But the sources of that power are evolving. Technology, user expectations, and global competition are changing the terms.
The next chapter of financial services will not be written by banks alone. It will be shaped by those who build trust, adapt quickly, and deliver value. Whether old guard or new entrant.
