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Financial institutions have a long history of moving slowly when it comes to change, which may be why they are uncomfortable in the face of FinTech firms. The always-on, constant rush of change that pervades the financial technology industry may feel disruptive, but rising startups are helping older and staider institutions discover the value of deep, personal relationships with their clients. Banking has shifted significantly in the past decade from being a physical location to become a method of conveniently accessing wealth regardless of a client’s physical location. Are banking professionals now able to acknowledge the larger value that FinTech organizations bring to their customer relationship, making these partnerships a match made in heaven?
Customer Expectations Soar
Perhaps the guiding light for this partnership is the expectations of their mutual customers. As younger generations enter the workforce and require a storage facility for their funds, the reality is that no one-stop shop is going to answer everyone’s needs. Customers today have much higher expectations than in the past, that:
While some banks are making great strides towards achieving these ideals for customer access and usability, others are struggling within the space. That’s where FinTech firms enter the picture.
Technology Innovation (Disruption)
Banking has always relied on innovation and technology to resolve customer needs, and that’s never been truer than with today’s current wave of requirements. From crowd funding to currency exchange, online lending to tech-enabled payments, technology is driving how individuals and organizations interact with their finances. Regardless of what financial technology organizations want people to think, advances in technology are more evolutionary than revolutionary, as online banking and even ATMs are relatively new technological advances when you consider the lifetime of banking experience. Most of today’s advances are for the convenience of customers, as much as to provide economies of scale and additional security to financial institutions.
Challenges and Opportunities for Banks
Banks have hundreds of years of history — and knowledge of their customer — upon which to draw, but they don’t always have the nimble infrastructure required to respond to the ever-changing needs of consumers today. Banks tend to place more value in the face-to-face interactions that have driven the conversation in the past, instead of the ultimate convenience craved by busy individuals in today’s digital world. However, banks have used their time well by building up trust, creating regulatory and security frameworks and a deep understanding of government compliance needs as well as globalization requirements.
Banks have a huge boon that most startups would love to have: deep pockets. While they move a little slower than a more nimble organization, they’re able to stand the test of time and make the investments needed to bring their organizations up to par with customer expectations.
Challenges and Opportunities for Finance Technology Firms
While technology is pervasive, smaller FinTech firms still tend to focus on a relatively small slice of the overall financial services pie. Often, these smaller organizations are formed to solve one specific business problem instead of the wide gamut of services that are offered by brick and mortar banks. From micro-lending to digital currency, FinTech is certainly here to stay, but they’re not expected to be able to challenge the dominance of banks anytime soon.
On the flip side, financial technology startups are often savvy and proactive — looking for specific business challenges where they can innovate and vastly improve the current customer experience offered by the larger banking counterparts.
Deeper Partnerships Needed
Seeing how FinTech and banks could work together doesn’t take much of a stretch. While the larger banks offer the expansive pockets and core-deep understanding of regulations, security and the customer, financial technologists “get” how customers want to interact with their finances in today’s always-on digital world. The thin veneer of technology that many banks have spread over their current operations — providing tellers with a tablet, offering online or mobile banking with limited functionality — these are not true transformations within the space. This is where the technology gurus step up with knowledge of Big Data and an understanding of how to interact with individuals fluidly across diverse digital properties. Finding the right partnerships within the space will allow both types of organizations to leverage their best practices and knowledge to provide customers with a sticky experience that will make them not just customers, but evangelists for the brands.
While FinTech firms and banks may currently have a bit of a complicated relationship, the partnerships that will come out of the conversations will benefit both sides of the fence. However, the biggest benefit to these dream partnerships may be for the most important people in the relationship: the customers. When you’re ready to learn more about how your Boston organization can leverage the power of technology to reach more customers and meet their needs more effectively, contact Radius Executive IT Solutions at (978) 523-2174, or email us at email@example.com. Our technology professionals will work closely with you to define your goals and needs, and the next steps required to take action.