New FinTech, combined with changing customer expectations, will create a race among banks to devise the most effortless and convenient experiences possible, with the customer likely to be the ultimate winner.
Whereas, in the past, much was made about the threat that FinTech posed to established banking models, there has been a gradual shift in recent years towards exploring the potential benefits of the two sides, old and new, working together.
The implementation of new and innovative technology and digital banking channels are undoubtedly transforming the finance industry and redefining customer experience. In fact, the question posed in a recent study commissioned by the European Banking Authority (EBA) was not whether FinTech would affect credit institutions’ existing business models, but by how much and how soon.
The ‘Report on the Impact of Fintech on Incumbent Credit Institutions’ Business Models’, which surveyed 37 European banks, revealed the vast majority saw FinTech-enabled products and services as a key driver for business growth, with 97% of surveyed banks stating they hoped it would help expand their customer base. Approximately 92% said they thought FinTech would help banks retain their existing customers.
The EBA found that, in general, incumbent credit institutions also seemed to be moving from a product-centred approach towards a more customer-centred approach. In an era where it’s never been easier to switch bank accounts, it is completely understandable that the customer is always right, or at least treated as such.
Unsurprisingly then, Customer Expectations/ Behaviour was identified as one of the four “drivers” that would be most likely to shape and induce changes in incumbents’ business models, alongside Profitability Concerns, Increasing Competition, and Regulatory Changes.
Customer is king, especially when it comes to the managing of their own financial kingdom. It is now expected that customers are to be able to make bank payments and transfers and complete applications quickly, easily and as pain-free as possible.
Complex customer journeys that are designed around meeting the needs of the bank and not the customer, are bound to fail. Instead, customer journeys should be effortless, comprehensive and, most importantly, make sense. If a customer has a question, problem, or would just like further information about something, especially in a high-stake purchase journey, then they prefer to get that information from a clear, concise and empathic face-to-face interaction.
The report also revealed that customers demand simple and transparent digital services, especially if a customer journey is long, or awkward or complex. Customers need to know where they are up to in the journey, how much further is to go, and where to pick up from, lest the journey becomes broken for whatever reason.
Customer journeys should therefore be as seamless as possible, regardless of whether customers are interacting with an agent online, or by telephone or in their local branch. Although they may be talking to different people, they should feel they are talking with one unified team and that there is a discernible customer-brand relationship. At these times, a human voice and helping hand, even remotely, is essential in reassuring customers that they are valued and being listened to.
Recognising the need and benefit of doing something, however, especially something that takes time and significant investment to implement, is not always enough to convince companies to take the investment plunge. The highly competitive EU banking sector, in particular, is facing a situation where it needs to simultaneously address profitability issues with the evolving customer demand for simple and transparent digital services. Many banks’ reluctance to invest in FinTech is amplified by the fact that benefits of deployment, including cost reduction and revenue growth, are unlikely to materialise quickly.
While some banks are undertaking the mammoth task of overhauling their legacy ICT systems and developing the necessary FinTech themselves, others have decided that strategic partnerships with specialised FinTech providers is the way forward.
The message delivered by the EBA is clear – as FinTech has the ability to either transform or disrupt financial services and established banking models, it would be prudent to invest in the necessary technology today to exploit emerging gaps in the market and satisfy customer expectations, so companies may reap the rewards tomorrow.