With The Rapid Rise Of Fintech Companies Forming Over The Past Decade Or So, Competition Has Never Been Tougher In The Sector.
The rise of fintech’s and challenger banks have disrupted the market because of their forward-thinking approach to how they deal with customers, leveraging current technologies to not only attract new customers, but retain them.
Fintech’s have challenged the long-established institutions primarily thanks to their focus on what customers want.
A Shift In Consumer Behaviour
The 2008 financial crash brought with it an opportunity to evaluate and reinvent how financial services would operate. This tied in importantly with the growing reliance on technology that we all use to go about our daily activities.
The common narrative is that traditional banks are struggling to match the technological output offered by rival challenger banks. With systems already operating at scale, larger banks are finding it difficult to pivot and use current technologies compared to the rise of online only banks.
Larger institutions are therefore investing huge sums of money to retain existing customers by offering the same technologies that challenger banks are adopting and offering at greater ease. The question then is that, are the larger banks fighting an uphill battle?
There Is Still Uncertainty
The work that traditional brick and mortar banks are taking is certainly a push in the right direction. Whilst it is too early to say whether banks can shift to match current consumer demands, customer loyalty is not as clear cut as many experts are stating.
Recent findings have shown that consumers are in fact already loyal to their bank of choice. In fact, across all age groups, 70 percent stated they felt loyalty to their current bank, suggesting challenger banks may have a more difficult time prying away customers than many anticipate.
The findings suggest that many are joining challengers’ banks alongside their existing bank as opposed to making the shift. Time will tell whether this will remain the case, if challenger banks continue to offer a superior service however, consumers will gradually make the shift.
90 percent of those asked state that technology is an important factor when it comes to deciding their bank of choice. Contrastingly, only 88 percent said interest rates provided on savings accounts and credit cards were an important factor. This is a huge surprise, many assumed interest rates on offer would be the prevailing factor, yet technological offering is a priority for the next generation of consumers.
Seamless Online Purchasing
Customers are less concerned about who serve them in the current day, it is more about the experience that is delivered. A bank using its reputation and history should have greater ease in capturing and retaining market share if current technology is adopted.
Customers were found to be happy to stay with their current bank if they kept up to date with the latest technology. With an expectation of a seamless experience, 54 percent of those asked state that a seamless online purchase is essential with their bank of choice.
This figure is expected to have risen quite substantially as a result of current events, specifically the COVID-19 lockdown enacted across most of the world. With a greater reliance on online purchasing, banks that did not provide a secure but efficient online purchasing service will be at greater risk to challenger banks.
Banks Need To Prioritize Technology
Predominantly, banks have invested large sums in their brand to improve customer loyalty. By marketing themselves as a leading bank, consumers would in the past feel more secure, knowing the bank has many other customers.
However, consumers are more willing to use challenger banks now. Less focus needs to be placed on branding and more on investing in the latest technologies that consumers will expect from their bank.
Modern consumers not only value technology based on ease, but also on security. Modern consumers have less concern over who is processing their payments, rather that they are easy to use, are cost effective and are secure.
Banks need to ensure they are working towards internal platforms that operate at speed and offer the highest levels of security.
Banks also need to capitalise on retailers that are willing to offer strong payment technologies, examples being Apple Pay or PayPal, that offer ‘buy now, pay later’ services. This is something that is very popular with modern consumers, creating more reliable and flexible payment options that big brands in the financial scape should align themselves with.
Banks will secure competitive advantage if they are able to provide the latest technological offerings that provide speed and security, at scale to their customers. Focusing on the latest technologies to improve ease and security, banks can then promote these service offerings, ‘keeping up’ with challenger banks whilst retaining their larger existing customer bases.