Bank clients expect ever-growing levels of convenience as digitalisation progresses. Simultaneously, both fintechs and global heavyweights compete for a piece of the pie. Banks must partner up with savvy digital natives to leverage their well-established user bases and reposition their digital offer.
Disruption makes banks ramp up digital offer
Start-ups such as Uber has disrupted whole industries and left old business models futile in the process.
Rightly, the banking sector is highly aware of similar threats posed by numerous fintechs. Furthermore, consumer trends speak a clear language: more than three quarters of global bank account holders had used online banking within the last 12 months[1]. Moreover, the frequency of daily mobile banking use doubled worldwide between 2012 and 2015[2].
With technologies such as robo-advisors pushing the agenda, leading British banks now investigate options of ramping up their digital offers.
A challenging window of opportunity
The fintech threat is real: According to a 2016 survey, around 25% of global consumers have already used products or services provided by a Fintech. Another 15% intend to do so within the next 12 months[3].
While convenience most strongly motivates consumers to start using fintech products[4], they will not adapt new solutions without trust in the service provider[5]. This presents a unique opportunity for banks with well-established brands.
While fintechs struggle to build up unknown brands, banks can leverage their extensive user bases to introduce more convenient services. The challenge? Introducing such competitive services with an acceptable time-to-market and security level.
Partnering up to fasten time-to-market
The marriage between century-old banks and ideas from young, dynamic sector remain demanding. Banks, and their legacy systems, are simply not geared towards it. Adding to the complexity, legal and compliance regulations put clear boundaries to what a bank can and cannot do.
Considering these main pain points, banks first and foremost benefit from strong collaborations with ‘digitally native’ partners, which understand their complex compliance setup but are not restricted by them. Of course, partnering up with the right fintechs demands a thorough checks.
In order to protect the bank’s brand, only partners with a proven track record of proper data management, digital security and privacy protection should come into consideration. Furthermore, speeding up time-to-market with an external partner is only worth the trouble if a competitive service is introduced.
Leveraging distinct advantages
Consider what makes banks unique in today’s data-driven market: Banks know their clients exceedingly well. Through account statements, they get front-row insights into their everyday lives, investments and whereabouts. This fact puts them in a unique competitive situation, rivalled only by large players such as Google and Apple.
However, unlike Google and Apple, banks have not built their entire business model on the need to sell user data to third-party entities. In fact, they thrive only on the promise of safe-keeping such data. Hence, they can provide something special: a promise to safe-keep important personal data.
Reviving the physical vault in a digital form
Today, the average person is managing an ever-growing number of important, personal files and passwords. When of particular legal, monetary or personal value, files are worthy of a superior protection. For centuries, banks have been the caretakers of physical assets. They are now in an obvious strength position to provide customers with a convenient place to safe-keep their digital assets.
With such an offer, the high level of regulation in the banking sector becomes an advantage. It is because of the extraordinary security, that banks would indeed seem a natural choice when an end-client is looking for a digital equivalent to the physical vault. Additionally, the long-term nature of data storage would bind clients further to the bank, especially if integrated with convenient digital delivery of bank statements.
[1] Source: Verdict Financial’s 2015 Retail Banking Insight Survey
[2] Source: Verdict Financial’s Retail Banking Insight Survey 2012, 2013/2014 and 2015
[3] Source: Verdict Financial’s 2016 Retail Banking Insight Survey
[4] Source: Verdict Financial’s 2016 Retail Banking Insight Survey found that 40% of global consumer plan to use fintech due to higher convenience
[5] Source: Verdict Financial’s 2016 Retail Banking Insight Survey found that 50% of consumers do not adapt new fintech solutions due to risk aversion e.g. they do not trust new providers