Is FinTech finally coming for the banks?
My colleague Mike Orlic recently wrote about the future of the insurance industry and I found it really interesting that he focused less on the new and emerging ‘Insurtech’ and more on the fact that a truly successful insurance company will be one that helps you as a partner throughout your entire life.
This really reflects some of the changes in customer journey strategies that I have seen becoming more common in recent years. Customer service used to be just about managing those post-purchase calls - often complaints. Now we are designing processes that allow brands to build long-lasting positive relationships with customers over many years.
The emphasis Mike used is something I explored in one of my own recent articles that focused on digital complexity. There is a trend towards looking to customer lifetime value and not just applying metrics to each individual interaction.
This is where many of the emerging financial services technology (FinTech) companies have an advantage over the bigger and more traditional banking brands. From the start they have designed services that are focused, simple, and revolve around the needs of the customer. These companies have designed products around how the customer thinks. The traditional approach to banking has always been to assemble a group of products that customers can apply for or purchase - it is product-centric, not customer-centric.
Research by PwC looking at the future of FinTech after 2020 highlights the very real danger that traditional banks are not responding to the threat. This threat has been real for several years now, but many felt that their trusted brand and large customer base would be enough for the immediate future. This no longer looks true. The PwC research suggests that a quarter (or more) of traditional banking business will be taken by standalone FinTechs inside the next 5 years.
Deloitte has estimated that the FinTech market will consistently grow by almost 12% for at least the next 4 years - moving from a value of about $80bn back in 2017 to $188bn in 2024.
Faster payments, more payment innovation, Open Banking (see the latest CX Pod Europe for more analysis on this), digital infrastructure, banking platforms, digital lending, and more personalised customer engagement are all major FinTech trends highlighted by The Financial Brand as areas to watch in 2021.
I tend to agree. These are all FinTech trends that I have seen accelerating, but I think it is worth remembering what Mike said about insurance. Many of the emerging FinTech brands are building customer-centric services and can compete on this as an important differentiator when compared to traditional banks. However, there is nothing to stop major bank brands acquiring innovative start-ups or partnering with them - we get your new technology, and you get millions of customers.
The FinTech trends that I believe will really change the world of banking are those that are less immediately visible and are more closely linked to banking platforms and open banking. On our recent podcast Huw Davies, the co-founder and Chief Commercial Officer at Ozone API, explained that Open Banking compared to present-day banking would soon be like comparing Blockbuster Video with Netflix.
There was a time in 2000 when Netflix was struggling. Marc Randolph and Reed Hastings offered the entire company to Blockbuster for $50 million. The Blockbuster CEO, John Antioco, thought it was a joke. He could not see any value at all in Netflix.
How times change. If analysts like PwC and Deloitte are already warning that FinTech is going to consume a huge share of traditional bank business, then maybe most bank executives should fear the future. But I think that focusing on the customer and designing banking services that support their lifestyle is how FinTech is truly going to succeed, and this approach could come from a traditional brand or new startup - it just requires that focus on the customer.
Iain Banks, Regional VP International Markets, TTEC is responsible for developing TTEC's full International go-to-market business plan for sales, marketing and solutions. Iain is an experienced, senior-level business development professional with a career spanning more than 18 years in the Global BPO/Contact Centre environment, with a proven...