#15- Lessons from the Fintech, for the Banks
The Unbundling of Banks has already started
Banking is not one product or service. It is a bouquet of offerings that gave the banks their revenue pools and profits- lending, transactions, corporate banking, investment products.
I have great faith in the ability of banks to adapt, but they must act fast.
Fintech companies are attacking one service/product at a time. This unbundling will continue till banking no longer stays profitable
Banks are facing competition not just from banks, but from everyone mobility, telco, e-commerce, social, and other platform players.
Why Traditional Banks needs a new operating model?
- Customer-centric products, at the right price points, is a challenge.
- Legacy systems, and branch/people heavy models are thinning the margins
- From back-end operations to client-facing customer services, banks are trying to digitalize the complete value chain.
- Opting for Omnichannel approach that integrates digital and physical channels to deliver an impeccable customer experience
- Customer experience does not come naturally to many banks. Uber, Amazon, Alipay, WeChat Pay, Neo-Banks, have spoiled the user.
All banks will not die, some will adapt
However, there are a lot of lessons they can learn from the new age Fintech players
- Adopt Customer centricity- Traditional Banks (particularly Branch banking) are the only players who keep your money and still make you take appointments. What worked in the non-digital age will not work in the Smartphone era
- Do not try to change consumer behavior, Leverage it- Fintech players do not take consumer behavior for granted. Fintech knows that we are moving to a world where customers only want to press a button (no forms, no branch visits, no calls, no waiting). Banks must adapt their business keeping in mind that their customers are the most convenience loving individuals
- Low Operation costs- Offline channels will not exist unless the customer experience is superior to the online experience. Multiple banks in North America have already started working to reduce their branch footprint. A hybrid model (online and offline) of banking will exist but the branch model will have to reinvent.
- More salesmen, agencies do not mean more outreach- 3rd party sellers do not care about your brand much. Loan and insurance agency relationships need to be re-imagined keeping in mind the quality of customer experience. The standards of customer service and user experience set by tech giants are way more difficult to meet in the present than they were in the past.
- Ecosystem/Digital Partnerships for SUPER-APP model- FinTech companies thrive on their ability to form the right digital partnerships. They want to develop “user-stickiness” in their ecosystem so that everything a client wants they can supply through one “SUPER-APP”. Banks trying to build everything themselves, will lose big. Open banking is the only way Banks can compete with super-apps.
- Transparency of Free model-Banks can be much more transparent in their cost of offerings and commission charges. Most of the non-banking products/services customers buy from the banks, they get lost in the web of commissions, fees, and other charges. Fintech is ensuring “100% transparency” on charges or are making most of the traditional banking/non-banking products like trading, investing, currency exchange absolutely FREE.
- Play an incubator or accelerator- In SME space, only those banks will win that play an incubator, accelerator, or problem solver for SMB/SME’s. Capital is just one of the problems that Banks solve, the future belongs to fintech that solves the operations, employee, and customer management problems of the small businesses.
- Innovate in terms of First principles thinking- Banks must stop thinking like banks, they must be willing to go back to the drawing board to- challenge existing processes, paperwork, KYC (kill your customers). Revamping your mobile app after every few months, is not going to make you the next “Alipay” or “Wechat”. Observe the innovations in the financial services and tech industry closely.
- Personalization- B2C is dead, B2me is the future of banking. Fintech companies use a 1:1 personalization model, banks think like a broadcaster. Design products keeping the digital consumer in mind.
- Digital Talent- Change your culture and change your people. Upskill them on digital banking experience. Hire people who can transform your bank DNA into Digital DNA. Get smart people and get out of their way.
What’s holding the Banks back?
The target of full-scale digitalization of banks is hindered by various forces prevailing inside and outside the organization such as complexity and a wide range of infrastructure models that exist. Also, there is a skill gap and a lack of awareness among the customers.
There are no accidents in Business, in fact, there is always something you forgot to anticipate and act on.
Author- Digital Strategy and Fintech Expert
Meet me on Linkedin and Twitter-https://twitter.com/Siddhartha_monk
