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Financial Services Platform & Products

For banks, collaborating with fintech is the future

06/24/2022

by Susanne Turnbo

Last week, I attended Fintech South in Atlanta. After two days of insightful conversations and thought-provoking keynote presentations, I left feeling energized by the potential of financial technology and its impact on a variety of industries. It’s unsurprising that banks are on this list of impacted players. What’s worth commenting on are current trends in the financial services industry and how fintech can support these more traditional institutions.

It’s important to note that banks don’t always need to compete with fintechs. Banks are long-standing institutions that have built trust by being a safe space for individuals and corporations to store money. Fintechs are financial software companies that excel at driving innovation and industry disruption. The way for banks to identify and maintain a competitive edge is to start collaborating with fintech by using emerging technology as a tool to stay ahead of these four industry trends:

1. Personalized banking experiences

From Netflix recommendations to DoorDash push notifications to curated Spotify playlists, customers experience highly personalized digital experiences every day. While these experiences vary in intensity and frequency, they work together to build customer loyalty. On the other side of the spectrum, hyper-generic customer experiences that are void of curation and personalization can be jarring for digitally savvy customers.

Banks have the opportunity to leverage fintech to create the personalized experience that customers have grown accustomed to, even as traditional institutions pivot from brick-and-mortar storefronts to interactive apps. Investing in the customer experience is a way to encourage customers to consolidate their financial services – including investment accounts, home and auto loans, credit cards, and checking accounts – under one bank.

2. Single point interactions

When you travel on your favorite airline, do you use the in-app mobile boarding pass? And when you land in a new destination, are you met with a push notification from the same app with options to book a hotel room or rent a car? At that moment, the airline’s app becomes your personal “easy button.” Every travel service you could need is at your fingertips, even when those services are provided by different companies.

Even though finding aggregated financial information at a single point, like a mobile app, is still in early development, it’s coming. Consumers want the same “easy button” they see while they travel to exist while they attend to their day-to-day banking needs. Today, banks have the opportunity to work with fintech companies to develop this technology early so they can be on the front end of this consumer trend.

3. Smart data application

Customers are changing. From less traditional income structures (thanks, gig economy) to different financial priorities, consumers today have different risk profiles than those of generations past.

Banks have access to enormous amounts of customer data. Implementing the right fintech to optimize that information will enable banks to make data-informed decisions. These decisions include developing new risk profiles that more accurately reflect changing consumers and using that information to make loan and credit decisions. If a bank lets this emerging technology pass them by, they run the risk of missing out on less traditional, but increasingly common, customers.

4. Evolving economic climate

Every bank is facing a different set of challenges as they navigate the changing economic climate. Higher interest rates mean that newer companies have limited access to the “free money” their more established competitors enjoyed as a result of favorable conditions for securing funding and raising capital. Meanwhile, smaller banks may struggle to innovate as they examine the hefty price tag of emerging technology. Large banks, on the other hand, may have the financial capital to experiment with fintech, but have a vested interest in maintaining brand recognition and trust as they collaborate with software startups.

There’s not a clear path forward for any financial institution, but one thing is for sure: we’re at an inflection point in the industry. Banks willing to use emerging technology to create an outstanding customer experience and make data-informed decisions will flourish, while other institutions will remain stagnant.

Banks collaborating with fintech is the future

Developing a strategic approach to partnerships is the first step for banks who are ready to incorporate fintech. Asking questions like, “Which fintech company aligns with our customer experience philosophy?” and “What does our ideal timeline for implementation look like?” are ways to start developing the strategy that will lead your company through this new technological era.

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