Today’s banking industry is experiencing a digital shift that shows no sign of slowing down, with FinTech companies blooming all over the globe to bring new customized experiences to an increasingly digital population in times of a pandemic.
However that shift doesn’t need to mean that both sectors are competing; both the traditional and new digital models can bring a mutually beneficial relationship by filling the gaps in each, in order for them to complement and grow together for the benefit of the customer. These rising opportunities can yield strategic partnerships for both sectors, where FinTech companies can offer readily available digital services that would take years for traditional financial institutions to develop, whereas these FIs in turn can help FinTechs grow by scaling distribution faster and at a lower cost, resulting in potential successful revenue share models for both entities.
Banks and conventional FIs have previously expressed their interest in partnering up with FinTech companies primarily to improve the customer experience, with a secondary interest in reducing operational expenses as well as a faster and more efficient fraud detection process. As time goes by, banks are increasingly considering joining forces with FinTechs to expand their products and services offering, and today this notion is as ripe as it ever was.
Electronic Bill Payment
Regarding banks and bill payment practices, Forbes mentions that less than 15% of customers use their personal bank’s digital platforms to pay bills, and they are mostly older ones that use this service. This makes it complicated for banks that focus on personalizing bill paying services to deliver customized recommendations to their customers, because making payments on a bank’s digital platform provides this bank with rich data that allows it to personalize content and enable its customers to make smarter, better decisions about their financial future, ultimately driving customer loyalty and relationship growth. However, this can hardly be done if customers don’t use the digital channels offered by banks.
In that scenario, partnering up with a FinTech company that negotiates customers’ bills could be greatly beneficial. Bill negotiation services offered by these FinTech companies enable them to support customers in reducing their monthly bills through negotiating with their providers based on their reputable financial situation. If customers have a good reputation, companies can help them save on monthly expenses such as mobile, TV cable, Internet bundles and more by negotiating their bills depending on their usage to get better rates for customers’ monthly bills while sharing revenue with the bank which offers a great strategic approach to solving this issue of electronic bill payments.
With the subscription economy still going strong, people subscribe more and more to various digital services and keeping up with all those subscriptions can be a tedious task. Banks and FinTechs are no exception to this rule, and some subscription-based banking models are emerging to find their way into our lives; models that could end up being as common as subscription models in other industries like Video On Demand (Netflix) and Shopping (Amazon). Subscription-based banking services typically offer premium services for a set monthly or annual fee that provides complimentary financial benefits such as travel insurance, different lines of credit, and free ATM withdrawals from different banks, as well as more in-depth benefits like providing free current accounts that do not charge the customer on foreign currency exchanges, and instant access to further benefits such as cash back offers, international health insurance, priority support and exclusive access to select airport lounges around the world.
If customers are subscribed to services from several financial institutions, this could lead customers to being frustrated and overwhelmed, and that is exactly why some mobile apps are tackling that issue by being dedicated platforms that track and manage bank subscription lifecycles. This includes partnering up with banks to help their customers purchase new subscriptions, tracking existing ones and their costs, comparing providers with the ability to switch between them, and finally cancelling undesirable subscriptions, all on the same dedicated platform. An extra benefit of establishing such a partnership is reducing costs of subscription-related customer service efforts, such as providing a live chat functionality that combines AI-powered chatbots with human agents to cater to subscription issues on a 24/7 basis. These platforms could bring these services through a one-time fee, which makes sense if you are a customer that feels overwhelmed with your many subscriptions; pay once, manage it all.
Privacy and Data Breaching
As the digital world grows, so do privacy and security concerns when it comes to user data. Our data is increasingly exposed as digital platforms depend on it for personalization and similar approaches, and identity protection protocols are continuously evolving as privacy concerns escalate with new emerging technologies. Keeping track of data breaches as consumers is a heavy and tedious process, and so some emerging web and mobile startups are specializing in making the process faster and easier, for consumers and banks alike. Based on the publicly reported data breaches, these startups analyze these reports to create a relevance score for each breach to provide consumers with recommended actions they should be taking. The main issue here is that customers are unlikely to keep visiting this service and staying updated on the latest breaches, and so this can be bypassed through the successful integration of these data protection services with the financial institutions’ digital banking platforms, allowing banks to deploy better security tools on their platforms while merging all digital services together and providing customers with regular updates on their data’s privacy.
Opportunities Worth ChasingSince the commercial emergence of FinTech as a potential alternative to traditional banking, banks have often explored partnerships with these innovative concepts, but today this potential is much clearer and banks are starting to see the benefits. It seems that the main reason for banks being previously uncertain to partner up with FinTechs is largely due to time-consuming decision-making and investment approval processes within banks, seeing as newly proposed products and services need to be justified in terms of meeting high ROI and significant revenue obstacles. This has led to banks filtering all these proposed products and services until they get that one new idea that will supposedly attract a big chunk of existing customers. However, what they should be considering today is the funding or acceptance of singular products that come in quantity, meaning they could try and achieve the high adoption rate they seek through many single products at a time, as opposed to relying on one comprehensive product that meets their expectations. Should they adopt this notion of FinTech partnerships being a mutually beneficial relationship instead of competition, banks are bound to reap the benefits by creating new revenue streams and evolving with the digital age as they should.
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