We might be heralding the latest generation of disruptive FinTech firms as banking revolution but the fact is they’re simply the next stage in an evolution that can trace its beginnings back to the dawn of consumer financial services. Nevertheless, evolution or revolution, the result is still the same – lasting change.
What do checkbooks, credit cards, ATMs, wire transfers and the NASDAQ have in common? They’re all examples of FinTech and each one was conceived for the same reason – to make their users’ lives easier. For over 100 years, banking and financial services organizations have been identifying pain points within the industry and taking steps to remove friction, simplify services and improve the customer experience (CX).
However, right up until the 2008 global recession, what each of these FinTech innovations also had in common is that they originated from within or were commercialized by the banking and financial services ecosystem.
In the decade that’s passed, the economy and our employment levels may have returned to pre-crisis levels but the same can’t be said of customer sentiment towards financial institutions. People’s trust has been eroded to the point where these organizations have some of the highest customer churn rates of any industry – when customers have no reason to be loyal, there’s no reason not to switch.
As people are moving away from their banks, FinTech is moving away from the traditional BFSI ecosystem in the form of laser-focused startups who – thanks to their lack of ties to the establishment and their understanding of how today’s technology aligns with today’s customer expectations – are quickly winning market share and are even beginning to worry the establishment.
It’s easier to build trust from scratch than to win it back once lost, so this new generation of companies has a major advantage over the traditional banking sector. Likewise, as well as having no ties to the establishment, they have no legacy systems and no physical branches; they have only piles of data they’re expertly processing and analyzing to keep on improving their offerings and services – and their CX.
Their impact isn’t only felt by the industry in North America; across Europe and Asia FinTechs are disrupting the financial status quo and growing their market share. In 2018 alone, FinTechs around the globe attracted a combined $59.5 billion in investment.
However, 2018 is also significant for another reason. It’s the year when the traditional industry realized it’s counterproductive to focus on FinTechs. The key to competing is to focus on customers. Transforming to a future state where data flows freely across and between all channels and all business functions will take many established industry players a long time to achieve; but most of the major banking groups are now looking at how to get closer to their customers through greater investment in customer care, digital channel optimization and data analysis.
The most forward-thinking organizations are taking things even further by looking to actively partner with FinTechs to give their customers greater depth and breadth of services.
The current FinTech revolution is a long-needed wake-up call for financial institutions. Technology has leveled the playing field so if you can’t start to align your products and services more closely to individual customer needs, someone else, with a better understanding of the differentiating power of CX can, and will.
However, this doesn’t mean that traditional banks’ days are numbered. Their financial strength and brand legacy are too great. But the organizations that thrive, rather than simply survive as the next wave of FinTech washes over the industry, will do so by using that strength as a platform for building closer, more personal relationships with customers as well as the growing ecosystem of businesses that can deliver the services they can’t.