Surviving the shockwaves of fintech
Out with the old
The rejection of the status quo is fast becoming a seismic theme of our time. First Brexit, then Trump. People are showing their dissatisfaction with their current lot, and the establishment. And it’s not just the UK and US: Iceland, The Netherlands, France, Spain, Greece, Italy have all had their tremors.
But politics is not the only arena where traditional certainties are being challenged. There’s the banks. In fact, it’s not just them, it’s the financial services industry in general from insurance to investment. A bastion of tradition being picked at by plucky fintech challengers.
Follow the money
The fintech industry has been getting huge levels of funding. Last year investment was over $22bn; over half of that as seed or angel funding. 2015 was up over 70% on 2014, and Q1 2016 was up almost the same amount on 2015. It’s a big and growing sub-sector of FS.
That investment drives scale and scope; more and more new businesses have resources to build ‘digital first’ offers across a wide array of customer touchpoints. As a result, serious fault lines are building up across the broader industry.
Watch your back
What have the traditional business got? Well they have extensive product suites, delivered across any touchpoint they choose. Their offers have been built over the years, and their channels have grown organically through decades. It’s those very offers and touchpoints that fintech businesses are repackaging as individual services, not as part of a suite.
The established players are also slowed by legacy systems and entrenched process. They have regulations to comply with, across markets and legislators. Inertia and overfamiliarity means that delighting customers is more often the exception than the rule in direct relationships. By contrast, the fintech business starts with people’s real needs and then deliver against them through exceptional tech-enabled experiences.
But it’s not all gloom and doom. Financial services firms, especially banks, are big brands. Generations of investment have built the accessible, credible and trusted status of household names. And brand awareness and brand salience count for a lot in financial services.
They also have exclusive content; your money and transactions. Which is a great place to start.
Create the aftershock
The Fintech industry and investors understand that there are no new problems, just better solutions. They find under-serviced needs and bring focus, resources and digital talent to meet them better.
Banks and the FS industry must look dispassionately at their products, services and how they deliver them. They need to look more passionately at customers to understand what works poorly and why. Commit to resolving today’s problems with elegant solutions, irrespective of the real or imagined constraints. And to do so, they will need to buy, borrow or, if necessary, steal ideas from the very fintech businesses that threaten them.
To learn more about how we are helping our clients unlock opportunity in the evolving financial services world, get in touch.