Friendtech? What financial institutions can learn from Fintechs
Sometimes market disruption can work to your advantage. Armed with new technologies that make transactions easier and more cost efficient, Fintechs are giving their more traditional and slow-to-change counterparts a run for their money.
But rather than solely focusing on competing with their tech-savvy rivals, financial institutions should take the opportunity to learn from their challengers. By evaluating their own strengths and weaknesses, leveraging innate advantages, and embracing the challenge to innovate on long-standing business strategies, financial institutions can realize a new level of success.
Even as Fintechs are putting uncomfortable pressure on financial institutions, they are creating a unique opportunity for institutions to take a leadership role in the financial services offerings of the future. Let’s take a closer look.
Advantages FIs have over FinTech
It’s no surprise that modern day consumers are attracted to the new avenues Fintech companies offer to pay, borrow, and invest. But financial institutions still provide an attractive option due to longevity and brand recognition. When Statista asked financial institutions executives about their strengths vis-à-vis Fintech firms, over 70 percent claimed customer trust and established relationships as their leading advantages.
Additionally, financial institutions are typically equipped with more robust risk management and security tools– driven in part by the need to adhere to complex industry regulations. This makes a difference to consumers: trust that their personal data will be protected is a big driver of trust, according to an Accenture survey.
Financial institutions, like those who partner with Vantiv, also have easy access to large amounts of data and analytical information that can be leveraged to design offerings that attract and retain cardholders.
Other advantages financial institutions have are a larger scale of operations, a broad array of product and services, and a time-tested means to deliver these services. Fintech companies, in contrast, typically offer niche products and services that are often available through limited channels and have not been thoroughly tested because they are so new. For example, some Fintech companies offer online banking options with limited account choices whereas established financial institutions offer both online and in branch banking options with access to variety of accounts for spending, saving, investing, and borrowing.
Taking a page from the FinTech playbook
Fintech companies innovate quickly but sometimes stumble along the way due to inexperience. Financial institutions, on the other hand, can apply their years of experience and inherent advantages to serve as a strong base upon which innovation can bloom.
A significant way financial institutions can improve is by focusing on enhancing the user experience; and an effective way to do this is by investing in new technologies. Mobile banking apps, for example, have become more important in the overall cardholder experience and one that cardholders expect more from.
Rather than simply accessing account information, cardholders are increasing expecting sophisticated tools and account management functionality from their mobile banking apps. In fact, 53 percent of consumers who switched their financial institution in the last 12 months did so in order to get a better mobile banking app. Features such as Touch ID, credit tracking services, card controls, and P2P payments are especially popular.
Strategies for staying ahead
Like any business endeavor, there is no sure-fire way for financial institutions to take on the challenges Fintech presents the industry. Various strategies financial institutions can consider to compete in a Fintech driven marketplace are:
- Building similar products and capabilities in house
With collaboration and investing, a new term has emerged, “fintegration.” According to one industry executive, fintegration describes how banks embrace innovations from the broader Fintech ecosystem to benefit customers. While Fintechs use technology to improve the customer experience, financial institutions can leverage cardholder relationships, risk management proficiencies, and vast resources. By combining their strengths, Fintechs and financial institutions can deliver the new financial technology products today’s consumers want.
As financial institutions continue to be concerned about Fintech disruptors, they need innovation strategies in place in order to compete. Companies like Worldpay offer the tools and strategies that help financial institutions not only keep up, but surpass their competitors. With a view into the entire payments ecosystem, Worldpay can provide actionable insights that help our clients succeed. To learn more about our offerings and the trends impacting financial institutions in 2018, check out our infographic.