While fintech is bringing innovative solutions to banking, payments, lending, and other aspects of our lives, banks worry about losing their customers. We can see the digital revolution in every industry, but banks and financial institutions experience the biggest disruption and it’s completely changing the business model they have used up until now.
Recent research from HSBC shows that people would sooner trust a robot working as a heart surgeon than a robot banker. At the same time, 80% of consumers believe that technology makes their lives easier.
Of course, banks have come a long way already – which has resulted in some improvements, like online banking that we experience through our smartphones, but they still forget about one of the most important things – the customer experience. On this score, the modus operandi hasn’t changed very much over history.
The painful truth is that most banks are still living in the 90s and understand very little of digital. They are slow at innovation and many of them haven’t changed much at all over the past 20 years. Their legacy systems with outdated design and paper-based processes are far behind the expectations of today’s customers. By ignoring UX, banks are losing their customers, who have become sick and tired of a bad experience.
Do banks feel the pressure?
Banks are not going to disappear, but, without a doubt, without embracing changes they can irrevocably lose customers. Especially when people can switch banks and financial solutions more easily and quicker than ever.
According to PwC’s Global Fintech Report 2017, 88% of global banks are worried about losing revenue to standalone fintech companies. On the other hand, banks are aware of technological changes, so they emphasize the need for fintech-banks collaboration. There’s still a lot to do for the improvement of the legacy systems.
Banks now see the need to welcome the digital disruption wave with open arms so some start to partner with fintech companies to make a smooth shift into this innovative world. All this to make banking services more customer-friendly and to gain customer loyalty (again).
Understanding customer needs
Fintech – almost by default – are more focused on meeting customer needs and expectations. That doesn’t hold true for banks.
The sum and substance of all this is: Customers face a real struggle when they use bank services.
Banks have been around for decades, so people have used to their products and services, but the world is changing (so are people’s habits). Millennials, especially, are disappointed with the level of service provided by banks. With banks failing to deliver products and services that meet customer needs, there is a huge open door for fintech companies, who see a huge opportunity for their own solutions.
Jamie Dimon, JPMorgan CEO once said that “Fintech has been great at making it easier and often less expensive for customers and will likely lead to many more people, including more lower-income people, joining the banking system in the United States and abroad.” Bearing this in mind, we can see that the main difference between banks and fintech is that fintech is actually solving real problems.
A Forbes report states that fintech investment had risen $5.2 billion in the Q1 of 2016 from $1.8 billion in 2010. What’s more, according to CB Insights report, VC-backed fintech companies raised $2.7 billion in the first quarter of 2017. The numbers speak for themselves.
All in all, it’s a question of trust. People who trust businesses are more likely to pick their services. But, banks (as well as fintech companies) should understand how the trust is built. It is highly connected with the experience of using the product or service. The ease and convenience of using a product lead consumers to make decisions about choosing a certain solution.
What is the main goal of forward-thinking companies? Providing a product that will simplify people’s lives and maximize customer satisfaction. They know that considering the mindset of today’s customers is the best way to create solutions people really want to use.
Today, customers can get their financial activities done in seconds. They are provided with convenience and secure experience that (almost) completely meets their needs. Consumer-friendly services and applications with very responsive customer support or virtual assistants are becoming our reality and consumers seem to trust them more day by day.
Fintech solutions are making it easy to pay, send, receive or lend money online without leaving home. We live in the era of smart devices, so people come with different needs than, say, 5 years ago. They are looking for solutions that will simplify their lives.
Innovative companies enable consumers to make real-time transactions with push notifications they can see on their smartphones. It’s smart, convenient, and user-friendly — and basically, delivers everything people want and need.
New, breakthrough payment technology completely has changed the way we pay for goods and services on the internet. Now we have one-click payments and, as frequent customers, we don’t even have to remember our card details. In a few years, we will be able to pay using gesture and voice recognition. The same goes for personal finance, insurance, currency exchange, lending or investing solutions.
Going further, fintech products help people to make better financial decisions, save massive amounts of time and keep them feeling like they have control over their money. Strictly speaking, fintech companies are addressing customer pain points directly.
Banks need some ‘push’
Two years ago, it was predicted that fintech companies would cause bankers to lose their jobs by 2020. The main reason of this theory was to replace humans with technology. We all know that the human factor is still needed (and will be for a long time). But, banks should be more concerned not about the fact that fintech is using technology, but how it is used. Because fintech companies make their services more efficient, customers are more willing to make a shift.
Delivering innovative solutions that simplify the lives of customers today has become a market standard, so banks that want to keep their position and stay relevant, have started to partner with fintech companies, or even acquire them. The most important thing that banks can learn from fintechs is to provide customer-centric solutions, not get stuck in product-centric thinking.
In the last few years, banks have changed a lot, but there’s still a huge work to be done. Fintech companies offer more accessible, and usually cheaper, financial services and products. Keeping that in mind, banks understand the need to join forces with fintech startups to improve their services in order to remain and attract new customers.
With the evolution of customer service in traditional banking not moving very fast, fintech companies took the user experience into a completely different level. Now, it’s crucial for each financial institution to transform and facilitate the service and make it as simple as possible for digital customers.
Fintech is no longer just a market’s buzzword, it’s part of our reality. Today’s customers have higher expectations than ever, so fintech will definitely change the banking industry (and does so now), but it’s not going to replace it completely. In all, banks still need some ‘push’ to solidify their position and continue to be competitive.
DISCLAIMER: This article expresses my own ideas and opinions. Any information I have shared are from sources that I believe to be reliable and accurate. I did not receive any financial compensation in writing this post, nor do I own any shares in any company I’ve mentioned. I encourage any reader to do their own diligent research first before making any investment decisions.