Have Traditional Banks Realized the Full Potential of Fintech By Now?
6 September 2021
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There was a time when traditional financial institutions
were skeptical of financial technology, partly due to the industry’s disruptive
nature and competitive position in terms of conventional finance. Today, as the
world is still dealing with the consequences of the COVID-19 pandemic, FinTech
has become a cornerstone of the ‘new normal’, and banking customers are finding
it increasingly appealing on a global level. This radical change in how we
manage our finances has convinced traditional FIs over time that the future
lies in digital, and that this inevitable change is better accommodated by
their infrastructure sooner than later, if they wish to stay afloat in this
raging sea of economic uncertainty.
FinTech companies and neobanks have seized the opportunity
to fill in the gaps left behind by traditional finance; gaps that only widened
with the onset of Coronavirus, but were ultimately filled by the
almost-exponential adoption of FinTech around the world due to its convenient
offering: no physical contact, instant financial access, remote account
management, and much more.
As more FinTech companies and neobanks managed to cater to
the needs of a post-pandemic world, their popularity rose and they became major
contenders for the modern banking customer. With significant cuts to physical
cost, these new players injected their capital in new emerging technologies
that helped position them as disruptors of the digital era, delivering customer-centric,
tailor-made experiences that delighted consumers and basically eliminated the risks
associated with branch visits, saving a lot of time and effort in the process.
This consumer-first approach has resulted in a banking
population that expects everything to be available ‘right now’, with rising
expectations of ease, speed and convenience from their banks. While all this
was happening, traditional financial institutions were relatively late to
acknowledge FinTech’s potential for satisfying the modern customer, and even
today as they adapt to the situation, they are still encumbered by their legacy
processes and infrastructure. However, banks today have also prioritized their
digital processes and are swiftly jumping on the speeding train that is
FinTech. They are actively trying to guide customers away from slow,
traditional processes through launching mobile banking wallets and apps, and
perhaps more importantly, banks are actually partnering up with various
innovative FinTech companies and startups that smoothly complement their
offering, whether in the backend of frontend. They are trying hard to
streamline the customer journey, using digital ID verification solutions and
similar technologies that are big on speed, reliability, security, and ease of
use.
Although FIs were aware of the need to digitize their
approach even before COVID-19, the pandemic has really accelerated this need as
physical branches were unable to open for the better part of a whole year,
resulting in an unprecedented need to finalize their digital offering. This
swift change sparked the digital journey for many traditional FIs, and they
realized that they were already poised to make an impact in that area due to
several existing factors:
Banks have the financial capabilities to digitize their
strategies and offerings and practically eliminate physical processes. They
also have an extensive knowledge database filled with customer profiles and
demographics, and this rich history can be leveraged to reach the digital
customer and maintain a healthy relationship with them. Finally, banks have
their brands solidified in their customers’ mind which offers a great
competitive advantage over emerging FinTech companies that are still making
themselves known. These existing advantages can be exploited by banks to
quickly gain ground in the digital finance ecosystem.
These capabilities are a great starting point for banks to
go digital, but there are many more questions that need to be answered, if they
are to catch up and compete with trendy FinTech organizations. Here are some
critical questions that leading traditional FIs need to contemplate before
making their digital transformation:
-
Are all digital processes
seamless and without interruption for customers? In other words, every single
digital service needs to be easy, intuitive and without hiccups in order for
customers to get (and stay) on board.
-
Are all the bank’s digital
channels aligned with physical processes and ready to accommodate the dynamic
needs of modern customers? Websites, mobile apps, branches, customer service
departments and any other relevant entities need to communicate and execute
seamlessly between each other, so in turn the customer experience becomes
flawless.
These are important questions to ponder, but the process of
digital transformation is nowhere near as simple for traditional banks and FIs;
this is why the time is now to invest in digital technologies and optimize
digital channels to reflect all physical processes as much as possible, which
allows for banks to perform their core offering in the background while maintaining
their modernity and relevance with the digital crowd to keep the modern
customer and acquire new ones along the way. The road is long but traditional
FIs are greatly positioned to catch up with established FinTech companies if
they adapt their strategy to the digital age.
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