Banks vs. Fintechs: Are we heading for War?
The current status-quo of big banks handling everyone’s money is beginning to be phased out by new and forward-thinking financial companies. Consumers are craving modern banking tools that give them control of their data, minimal fees, and also the ability to freely use new financial applications that make moving money easy.
We are living in a hyper-personalized world now, and legacy banks are struggling to loosen their grip on their customer’s freedoms. If they are not careful, they are going to squeeze so tightly that they will end up losing their share of the market.
The cause of all of this is the new notion of open banking and customer-centric services that streamline financial processes.
Open Banking
As history tells us, what happens in other corners of the world is likely to spread to us here at home.
Germany and the UK have launched new open banking platforms that are seriously threatening the dominant hold that big banking has on consumers. Platforms such as Germany’s N26 and the UK’s Monzo are offering consumer-centric business models that have gained them millions of users. These platforms allow users to have control of their data and freely use services like Venmo and Square’s Cash App, charge zero ATM fees, and even help users plan and execute financial goals.
Even here at home, new challengers such as Chime are giving consumers another option apart from legacy banks. These platforms all offer users much more accessible customer service and personalized services that you and I actually care about.
Is Open Banking going to help or hurt Banks?
Are Banks Going to Lose?
At this point, it is anyone’s guess. One thing is for sure though – they aren’t going down without a fight.
The research shows that providing hyper-personalized services and adopting more intelligent services such as savings and money management assistance can increase revenue for banks by up to $300 million (Boston Consulting Group).
This is not something these legacy institutions will ignore, and they have the means and resources to make some big moves. Unsurprisingly, that’s exactly what they’re doing.
The robust databases give banks a strong hand to play off of. The data is clearly telling them they need to zone in on their customers and focus more on customer service, customized solutions, and smart assistance. It will be difficult for startups to match the analytics and insights these banks would be able to offer customers and the advanced tools and services they have the ability to create.
For example, one of the main innovations that big banks have set their sights on is the Internet of Things, more commonly known as IoT tech. Big banks are investing heavily in this technology and are planning on offering very advanced features that the smaller digital banking platforms will have trouble keeping up with.
Connected Devices
IoT directly connects banks, the businesses you spend money at, and various objects such as cards and wearables through sensors. This makes it possible to cut out the need for debit and credit cards. The inter-device communication opens up possibilities for automatic payments, trend analysis, and smart recommendations and planning services. This gives banks the potential to completely eliminate any processing or transaction fees and zone in on unrivaled insights and services for customers – which is a key trend that new startups have been championing against them.
In addition, the real-time data gathering from sensors in devices and retailers allows for faster access to customer data that can be turned into action and improvement. IoT will allow banks to provide personally tailored service to each customer at scale. This is a very difficult process that even modern digital banks are struggling to achieve.
The Takeaway
The point here is that big banks are most likely not going to allow these new startups to slowly phase them out.
These startups are playing the short game and giving consumers a real, now-ready platform that is fresh and new to consumers. They are answering immediate problems that consumers are experiencing with their legacy banking options. Big banks are looking ahead and planning their evolution while allowing these smaller entities to show consumers the possibilities.
One thing they need to realize is that the big banks are playing the long game.
They are investing in next-level technology that will give customers the tools they have been asking for and complaining about. They are not ignoring customers, they are just investing, testing, and biding their time. Many large banks in the U.S. are launching mobile apps, improving personalized services, and adopting new ideas such as money monitoring and instant transfers with Zelle. These are signs that big banks are not clueless and are just biding their time while these new, small digital platforms enjoy the short-term hype that inevitably will begin to level out.
The post Banks vs. Fintechs: Are we heading for War? appeared first on NowVertical by Daren Trousdell.