Fintechs are everywhere solving for the ways in which customers bank, shop and travel. They often offer a unique solution and help banks close gaps where offerings are scarce, and technology antiquated.
Fintechs - here, there, and everywhere.
Fintechs, they’re everywhere solving for the ways in which consumers bank, shop and travel. They provide the ability to offer something unique, quickly and help in closing gaps where resources may be scarce, and technology antiquated.
And while fintechs can be necessary and even beneficial to FIs, not all are customer focused. Sometimes the technology lessens the ability to showcase the consumer-facing products. Sometimes the technology solves the immediate need but fails to integrate into the broader environment. Other solutions provide the automation on the front end but can create internal challenges at the back end. But all are solving for one issue or another whether it be compliance, speed, costs or resources. Gaining new capabilities is a must for every institution, but one cannot afford to lose the consumer along the way.
Fintechs have exploded over the last 20 years, driven in part by high investment in the solutions offered by banks and non-banks. Meanwhile, fintechs increasingly demonstrate the ability to deliver lower-cost, highly personalized products thanks to the growth in AI-driven innovation and other technology investments. As of 2020, there were 1,463 fintech companies per Fortunly.com, and the research firm IDC projects a 25% growth in the space by 2022, driven both by rising customer expectations and increasing acceptance.
So, what are these companies trying to do and can the challenge they represent to banks be turned into an advantage? At their core, fintechs help companies by providing new capabilities, accommodating more complexity, reducing speed to market and housing an immense amount of data. Utilizing specialized software and algorithms, they stand ready to provide insights to help drive more business and put technology easily within reach.
Most FinTech companies work diligently to differentiate themselves from others and build a following. The truth of the matter is many overlap and compete. Integration, costs, and functionality are pillars to addressing the needs of financial organizations. However, there can be a gap between the core understanding of technology and the institution’s operating requirements. Think of the number of online banking companies, mobile app developers, and payment platforms in the market today. Many provide services with similar features and functionalities designed to reduce friction points along the way and make personal banking effortless.
The critical questions for banks when they partner, acquire or develop a technology are:
- What will the solution solve: compliance, customer, complexity, costs?
- Can the solution be fully integrated within each of the products and services or will it expose compliance or productivity risks?
- Can the specific functionality be applied across the organization, or will this be a siloed solution
- How will this help the bank retain/grow its customer base and share of customer activity?
Automation with Answers
Purchasing a home can be an exciting time in someone's life. Still, that expedition can be bogged down and often becomes an epic journey involving personal financial information, credit history, bank accounts, rates, documents, disclosures, employment history, and so forth. Most look at it as an uncomfortable, labor-intensive financial examination. Meanwhile, fintech companies have become particularly adept at tracking and monitoring the application journey and removing some of the hurdles affiliated with the process, leading to the instant gratification consumers expect.
Singapore's DBS Bank recently developed an app to help customers buy a home with real-time information and support. Potential homebuyers experience a robust environment offering all key points of the cycle, from identifying a home, defining the location, sourcing a sales agent, and learning about the community. Through this advanced technology, consumers can isolate location and history on past home sales while also gaining information about taxes, schools, and commuting distances. Further enhancing this experience is the ability to identify moving companies, utility providers and connecting them with a realtor, and ultimately complete the mortgage application online. The process is intended to provide the customer with as much real-time integrated information as possible without resorting to a third party or toggling between multiple apps and websites. DBS aims to provide the customer a seamless, one-stop destination for their home purchase journey, focused on the customer but leveraged and enhanced by technology. Not the other way around.
Most banks take a holistic approach to serving customer needs, whether online or within brick and mortar. The challenge lies with the tools available to map their journey. The lesson here is for FI’s who can integrate the search and provide the closing actions together will be the big winners on the experience front. And banks should pay close attention.
Banks and other financial institutions already rely on a variety of third-party providers for their technology needs. What has become more obvious is a particular technology can be critical to performance but may also be disconnected from other key activities and requirements within the organization, thus creating internal friction points. No doubt fintech companies have accelerated change within banking; just look at the transformation in the past few years. Technology companies have made banking much more democratic and have made the customer journey efficient and intuitive. The key going forward is transforming from the reactionary needs to the anticipatory. Offering customers, the opportunity to integrate all actions in a transaction or buying cycle allows organizations to retain consumers, learn from the actions and grow.
Fintechs and banks can be successful partners when paired correctly, fully integrated, and offering ‘new’ capabilities together which is a winning proposition for all.