Is FinTech really reshaping banking or just repackaging banking?
Have banks finally found a way of repackaging banking? Consumer banking, once the bastion of stability in financial services, has seen the most “disruption” from FinTechs over the next five years. This exposure to “disruption” has been accelerated by the nature of banking products and processes for saving, lending, and business services.
The threats posed by FinTechs can disrupt four categories of incumbents’ business – market share, margins, information security/privacy and customer churn. But what does that mean for the average banking consumer?
Consumer-Centricity: Repackaging banking through FinTech
Call it old school, but a remarkable percentage of people still prefer human interactions in certain parts of the banking process. Unfortunately, a viable digital approach is now mandatory for banks wishing to compete across all consumer segments.
- Banks are still in the early stages of customer-oriented solutions, at least when compared to what FinTechs propose. 53% of banks believe they are consumer-centric, compared with over 80% for FinTech
- By prioritising 24/7 access, FinTechs offer services available via non-traditional channels, such as social media, that empower customers to a great extent. FinTechs also stand out from the traditional crowd with their focus on ubiquity and omni-channel offerings.
The bottom line is whether the smart banking solutions offered by FinTechs in collaboration and partnership with banks benefit consumers or are just a repackaged version of banking as we know it?
Cooperation between Banks and FinTech is repackaging banking
Banks are focused on delivering a reinvented and improved customer experience. Even if there is no simple “one size fits all” solution, there are some universal steps that will help banks get closer to what their customers expect. Banks should start simplifying products and services to facilitate comparisons between the market players and reduce client confusion.
But wait a minute! “Client confusion” is a direct result of the “disruption” caused by FinTech.[clickToTweet tweet=”“Client confusion” in banking is a direct result of the “disruption” caused by FinTech.” quote=”“Client confusion” is a direct result of the “disruption” caused by FinTech.”]
Technically, banks should design products
- with the user experience in mind instead of the common “processes as design guidelines” approach.
- banks should listen to customer feedback and use it to develop appropriate offerings in a timely manner.
Cooperation with FinTechs makes the task of becoming customer-centric easier to achieve since FinTech offers important complementary skills. On their side, FinTechs could benefit greatly from partnerships with traditional banking players that possess insightful customer data. So in reality, the fusion on banks and FinTech was a result of clever thinking. The cynicism that banking executives had on the onset of FinTech 1.0, has morphed into strategy. A lot of executives had a very simplified view of mobile banking:
Mobile banking is simply putting your old internet or online banking onto your mobile as well.
The point they seemed to overlook was that the increased competition within the banking industry created a petri dish which allowed mobile banking to evolve into ‘digital banking’ as we know it today.
So by partnering or collaborating with FinTechs, consumers are still being taken for a ride by the banks while thinking all along that FinTech has “revolutionized” banking: “On the subtle (and perhaps cynical) side, what the banks have succeeded in doing is getting you, the consumer, to do all the work (previously done by bank tellers or trusty bank clerks) and they (the banks) are charging you for the ‘privilege’ of doing their dirty work.[clickToTweet tweet=”Are banks still cynical of the about the fintech revolution? #FinTech #Banking” quote=”Are banks still cynical of the about the fintech revolution? “]
What “digital banking” , a result of the FinTech revolution, has achieved is getting the bank’s technology-loving customers to gladly do all the work (essentially form filling and data capture) while the banks save tons of money by no longer needing all those expensive, unreliable and ungrateful staff who really loved their careers. Now bank customers are doing all the work and are happy to pay for the ‘privilege’ in the sure knowledge that if they didn’t do it, the bank would charge them even more than they currently do. Yes, we certainly move through phases, and the more we change the more we stay the same.” We have just found an acceptable way of repackaging banking.
Have banks finally succeeded in repackaging banking with the help of FinTech?
The optimist in me is not 100% convinced. Fintech has taken the banking industry, laden with legacy systems, and allowed a lot of streamlining, which has resulted in cost reduction and increased opportunity and efficiency. We have found dozens of problems all solvable by the new technologies. However, are we inventing problems that really don’t affect the eventual customer in the name of innovation? It’s banking after all![clickToTweet tweet=”Have banks finally succeeded in repackaging banking with the help of FinTech? #FinTech #Banking” quote=”Have banks finally succeeded in repackaging banking with the help of FinTech?”]
Was the involvement of banks with FinTech always a trojan horse?
Although banks were slow to react to the disruption caused by FinTech, they sure jumped on the collaboration and partnership wagon. Fintech represents a new revenue stream for the banks, which are adopting a more opportunistic approach to dealing with technology innovation. What it really means in the long run is that banks are adapting to the changing financial services landscape.
New technology is inevitable and is just a part of the revolution that’s under way. So yes, the more the banking industry is disrupted by FinTech, the more we benefit. The competition and startups precipitated by the rise of FinTech was indirectly supposed to help banks create better, more convenient products and services for their customers.[clickToTweet tweet=”Most banks have an asymmetric risk profile for innovation #FinTech #Banking” quote=”Most banks have an asymmetric risk profile for innovation.”]