Digital disruption is happening at every level of the finance industry, changing the way both institutions and customers interact with finances. Additionally, today’s financial consumer is digitally savvy and demands prompt, convenient and seamless services. Fintech firms are responding better to this, thanks to their innovation and agility. Banks, on the other hand, are yet to catch up with this rapid pace of digitization. In order to survive in thisdigital disruption age, what can banks start doing differently?
Here are ways in which banks can respond to the fintech disruption:
Diversification
Banks can utilize new technology to gain access to new markets or offer services not traditionally associated with them. For example, the Royal Bank of Canada has moved to make the bank a broader platform by providing a diverse range of services away from usual banking transactions. These include owning a startup company and assisting clients in renting houses on Airbnb.
In other services, if a customer is looking to sell or purchase a home, the bank offers to research neighborhoods, move house items, and paint a house. It has even launched a service to help customers decide which garbage bins to take out on garbage picking days.
Banks should also move to reclaim a share of the traders and investors segment by providing access to financial markets via forex trading platforms. This will allow customers to have their financial activities in an “all in one roof” location, enhancing their overall experience.
Investing in FinTech Startups
Banks can use venture capital to invest in fintech startups or even acquire them outright. This will give them much-needed exposure to emerging financial technologies and also afford them a level of engagement within the tech community. It will also help them be more active in the fintech world so that they are not left behind by the future of digital finance.
Acquiring a fintech startup, for instance, will help traditional banks compete with other digital banking platforms. Also, banks will be poised for financial gain if their choice startup grows into a successful business.
Established banks also have the option of starting their own incubators for offering mentoring, marketing or legal support for a given period of time. They can then injectequity investment in the participants’ fintech products or ideas.
Assign Roles for the Transformation Process
Banks need to transform to survive in the current tech disruption. Doing that will require assigning roles to support this process. First off, they will require a capable team to drive the technological changes needed, including open banking, faster lending,robo-advice, cybersecurity, etc.
Secondly, banks will need a team to mitigate the impact of the change on the current business model. And lastly, there will be a need for a team to anticipate and cater to the needs of today’s digital consumer.
All personnel will need to work collaboratively on these important roles – charting the digital way forward and selecting new products to be unveiled in this new “era” for the institutions.
Switch into a “Digital Mindset”
To respond to fintech disruption, banks will need a paradigm shift into a more digital-oriented culture. This means reconsidering all aspects of how they conduct business – in the eyes of both personnel and an increasingly digital customer base. This will involve an overhaul of internal processes to accommodate contextual engagement and real-time operations. Contextual engagement means communication that is relevant, empathetic, and one that addresses customer needs in their moments of now.
Another internal change will be the increased use ofdata and analytics to inform and support decision making, new product development, and marketing.
Externally, banks will have to display a digital outlook by utilizing tech to improve customer engagement and experience. They will need to better understand the customer journey, motivations, their preferred distribution channels, etc. Additionally, banks will need to gain a better understanding of how the mobile phone has impacted the use of products, and how social media has changed the way customers make decisions.
Monitor the Industry
Banks can also insure themselves against the fintech disruption by keeping abreast of what’s happening in the marketplace. They can do this by leveraging tools and industry experts to recognize when change is coming, and to assist them to translate the meaning behind some seemingly random events. These people may be anyone; ranging from employees to customers to market analysts, etc. The most important thing is to know whom to listen to, and how to respond to any relevant trends accordingly.
