Definition
In this discussion, “big banks” refers to large, diversified, regulated banking groups with substantial balance sheets, deposit franchises and capital‑market activities. “Fintech” covers technology‑driven financial firms focused on areas like digital lending, payments, investing, and neobanking, often with lighter balance sheets and higher growth profiles.
Key takeaway
Recent commentary asking whether investors should “forget big banks and bet on fintech instead” captures a real shift in market sentiment, but the 2026 backdrop suggests the smarter question is how to combine both exposures, not replace one with the other. Regulation, rates and technology cycles favour different models at different times.
Why the “forget big banks” narrative is back
An investing column published on 1 May argues that fintechs are again looking more attractive than traditional banks, pointing among other things to SoFi being named Forbes’ top US bank for 2026 for the fourth consecutive year. This kind of headline fuels the idea that:
- digital‑first platforms are winning on user experience and growth,
- legacy banks remain bogged down in regulation, capital rules and legacy IT.
At the same time, BBVA and others highlight that US regulators are selectively easing some rules, encouraging digital‑asset activities and bank charters for fintechs, which can make the regulatory environment feel more supportive for innovative players.
Cause → effect:
- Cause: Strong brand stories around leading fintechs, high NPS, and regulatory openness to new models.
- Effect: A recurring narrative that the future of finance belongs to fintech, while big banks are treated as ex‑growth utilities.
What the macro and rate cycle mean for big banks
The macro backdrop in 2026 is not a straight win for fintech:
- Global growth is projected in the low‑3% range, with persistent geopolitical and energy risks.
- In the US and other advanced economies, policy rates remain relatively high compared with the 2010s, even if cuts are on the horizon.
Historically, environments with:
- positive but slowing growth, and
- still‑elevated rates
often support bank net‑interest margins and profitability, at least until credit quality deteriorates. Large banks also tend to benefit from flight‑to‑quality flows in risk‑off episodes, while non‑profitable or highly leveraged fintechs can suffer.
In other words, the same higher‑for‑longer rate regime that pressures some fintech models can be a tailwind for well‑capitalised banks with sticky, low‑cost deposits.
Regulation: headwind or moat?
Current regulatory trends cut both ways:
- In the EU, tougher Basel alignment and ESG expectations fall more heavily on big banks, but also raise barriers to entry and can make banking licences and deposit franchises more valuable.
- In the US and UK, selective deregulation and capital relief aim to boost bank competitiveness, even as supervisors tighten expectations around digital assets and non‑bank risk.
For fintechs, regulation is evolving too:
- Digital‑asset, payments and lending frameworks are becoming clearer, which helps scale‑ups,
- but supervisors are more attentive to consumer protection, operational resilience and capital where fintechs take on bank‑like risks.
Net effect: regulation is turning into a moat for some incumbents and a filter for which fintechs are allowed to grow into mainstream players.
Fintech strengths that the 2026 cycle reinforces
Despite tougher funding conditions, several structural strengths continue to favour fintech:
- Customer experience and data: digital‑native firms can iterate products faster and personalise offers based on granular behavioural data.
- Capital‑light models: many fintechs focus on fee income, software and distribution, avoiding large balance‑sheet risk.
- Adjacency into “tech multiples”: successful platforms in wealth, payments or lending can still command higher valuation multiples than most banks, especially if they can show recurring revenue and network effects.
The Adyen–Talon.One deal is a good illustration: a profitable infrastructure player is paying 750 million euro for loyalty software that deepens merchant relationships and embeds it further into client business models. That is a very different growth story from a mature bank optimising risk‑weighted assets.
Is it really “either/or”? A more useful framework
Instead of framing the choice as “forget big banks, buy fintech,” a more robust way to think about the space is along two axes:
- Balance‑sheet intensity (capital‑heavy vs capital‑light).
- Regulatory depth (fully bank‑regulated vs lightly or differently regulated).
This gives four broad buckets:
- Capital‑heavy, fully regulated (large banks).
- Capital‑light, fully regulated (some neobanks and bank‑as‑a‑service providers).
- Capital‑light, lightly regulated (many pure‑play fintechs, software and infrastructure names).
- Capital‑heavy, lightly regulated (a shrinking category as perimeter tightens).
In a low‑3% world with more frequent shocks:
- capital‑heavy, well‑regulated institutions may offer resilience and dividends;
- capital‑light fintech and infrastructure names can offer growth and optionality, but with higher volatility.
A blended exposure across buckets can be more robust than an all‑in bet on any single quadrant.
Quick Q&A
1. Are big banks structurally doomed by fintech competition?
Short answer: No.
Explanation: Large banks still control deposits, payment rails and capital; in many cases fintechs rely on them as partners. The challenge is adapting business models and technology fast enough, not an automatic decline.
2. Does a low‑growth, higher‑rate world favour banks or fintechs?
Short answer: It favours strong banks and strong fintechs, not weak ones.
Explanation: Higher rates can support bank margins but hurt over‑leveraged borrowers and fragile fintech models; robust players in both groups can still do well if they manage risk and funding carefully.
3. How should investors think about regulation when comparing banks and fintechs?
Short answer: As both a cost and a moat.
Explanation: Banks face heavy compliance costs but also benefit from barriers to entry; fintechs may grow faster in lighter regimes, but face step‑changes in cost and scrutiny once they move into regulated territory.
4. Does being named a “top bank” guarantee fintech outperformance?
Short answer: No.
Explanation: Awards and brand strength signal customer traction, but long‑term returns still depend on profitability, unit economics, funding structure and risk management — for both banks and fintechs.
5. Is it reasonable to “forget big banks” entirely in a portfolio?
Short answer: Usually not.
Explanation: Big banks often provide diversification, income and exposure to the rate cycle; completely excluding them increases dependence on higher‑beta fintech names, which can be painful in drawdowns.
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