03 March 2017
Banks are a better version of themselves thanks to fintech
The emergence of fintech companies is good news for banks, although many banks may see this differently. The general assumption was that fintech was a threat. But the opposite is true. New competition actually ensures that traditional parties take a closer look at their current services again, which means that banks now feel the need to optimize their services to the maximum and the customer is therefore the big winner.
Focus on the customer
This is also proved by UK charity the Fairbanking Foundation, that examined the world of banking. In its most recent ‘Ratings Report’ (2013-2016) the Fairbanking Foundation found evidence that the banking sector is showing signs of putting the financial well-being of customers at the heart of its products: It is the first time since the financial crisis of 2008 that the focus on the customer is this strong, according to the report. “In 2008, banking could have been compared to a cocktail bar, pushing drinks at customers who’d already had enough. Since then, fintech has managed to bring many in the sector around to focus on the needs of customers,” says Antony Elliot, chief executive at the Fairbanking Foundation.
The Fairbanking Foundation previously reported ‘alarmingly’ low levels of customer focus. But over the last three years the customer experience improved. The foundation recorded an increase of 57 percent in its ratings of current and savings accounts. The role of fintech here is not a marginal one. Because of the new competition, banks inserted alerts for customers so that they get noticed when the overdraft limit is near. It is a technology that is often used by fintech companies as well and a way to improve customer experience, because the customer feels like he has an extra help controlling his financials.
Another example mentioned by the Fairbanking Foundation is the introduction of savings goals. It is a tool that is introduced by fintech companies and the customer response was positive. The more you take out of the hands of the customer, the more comfortable he feels. After all, money matters are complex and cost a lot of time. The new parties on the financial market understand that and created new ways to help the customer. They focused on the customer, instead of on the business. Now, almost half of savings accounts from banks has the possibility to set savings goals.
Awakened by fintech
According to the foundation, banks now understand that customer focus increases their viability. They are awakened by fintech. The fact that they realize that it is time for change, is a first step. A next step is to invent and develop new tools to improve the customer experience, so that the banks will be leading instead of following. In this light, it may be interesting to acquire fintech companies or work with them. But regardless of how they do it, banks should identify the needs of customers. And with fintech breathing down their necks, there is no time to rest.
It’s time to look at fintech as an opportunity, not as a threat. That is the core message of the Fairbanking Foundation. Fintech is a catalyst for innovation and it forces traditional parties to reinvent themselves. Banks should profit from the momentum that is created by fintech. Because of all the new technologies on the financial market, customers are looking for a trusted partner that meets their needs. Now is the time to convince them that the bank is that trusted partner.
- Industry insights