FinTech is transforming the relationship between consumers and their finances. New technologies and fierce competition have given them a wide variety of options for how they bank. Here are four FinTech trends that successful financial institutions (FIs) are already taking advantage of.
FinTech Trend 1: Customer-focused innovation
Traditionally, FIs spent their budgets developing new products and ideas then sold them to their customers. As FinTech has moved from the back-of-house grunt work to an expanding horizon of innovative thinking, FIs are increasingly designing products and technologies around their customers’ needs.
“Don’t find customers for your products, find products for your customers.” –Seth Godin
In a 2016 survey by Price Waterhouse Cooper, only 53% of traditional banking institutions believe they are customer-centric compared to over 80% of new FinTech companies.
To date, this means such things as prioritizing 24-hour access and non-traditional service channels via social media. And the best way to reach customers in the future? Mobile. Not only will web-based customer-focused channels continue to grow, but the ability to easily access these innovations with a mobile device will be key.
FinTech Trend 2: Generational audience marketing
Millennials may be the driving force behind technology trends, but they are not the only generation that needs to be catered to. While they may be the future, right now Gen-Xers and baby boomers have more money and focus. You can’t ignore them and succeed.
Although they are a smaller population than the surrounding generations, Gen Xers have more spending power than any other generation. As they age over 50, they join the generational subgroup that drives more financial activity, more growth in digital channels and holds the most financial institution revenues in the US. Gen Xers also want the convenience of conducting transactions online but are looking to their financial institution for specific future planning because although they are currently hitting strides in their careers, they are either caring for children, aging parent or both.
Although 71 percent of boomers go online to access personal financial information at least once a week, the gulf between the younger and older halves of this generation are starker. For example, only 18 percent of those over 61 use mobile banking. Boomers still value in-person, one-on-one banking. They are particularly in need of help with retirement and caregiving plans, wealth management and fraud protection.
Best practices recognize the importance of cultivating millennials while keeping focus on the needs of these older and wealthier customers.
FinTech Trend 3: Evolving use of AI
The use of artificial intelligence (AI) continues to grow, taking over decision-making tasks normally performed by humans. This alone is not a bad thing; when coupled with automation processes, they not only increase performance time but decrease rates of error by taking humans out of the quotient.
AI, however, is not always the only answer. More and more it’s becoming useful to use AI in a way that augments human effort; giving human experts increasingly valuable time to handle things AI can’t.
For example, according to Bu Lo, cofounder and CEO of FutureAdvisor, as AI and automation continue to improve mundane duties, human financial advisors will have more time to, “focus on providing uniquely human value, like coaching and mentoring.” So instead of spending time dealing with administrative tasks, humans will have additional capacity to offer personalized services according to client needs.
FinTech Trend 4: Challenger banks’ agility advantages
Challenger banks – or “digital banks” as they are called in the UK where they’ve been far more successful so far – are completely digital FIs built on FinTech innovation versus the outdated systems legacy banks are anchored with.
Challenger banks are using consumer-centric technology from the beginning. Their products are designed for mobile already, providing real-time balances, spending data, easy money transfers and omnichannel payments. Operating on cost-effective shared service platforms, completely digital banks use cloud banking to reach customers wherever they are.
To compete in the mobile arena, big banks need to re-engineer their old data systems to meet today’s expectations. Digital changes are slow and expensive to make. Legacy infrastructure and culture are stumbling blocks usually far from agile in their actions and responses.