The traditional banking industry is surrounded by new entrants that have already changed the way consumers and small business engage with their financial institutions. But the vast majority of consumers still maintain relationships with traditional institutions for their primary financial needs. In this delicate balance, the financial institutions will need the help of FinTech enablers to help them fend off competition from FinTech disruptors on a mission to claim their customers.
New FinTech entrants fall into two categories:
Disruptors
These organizations compete directly with the banks, offering loans, wealth, and banking solutions outside of traditional channels. The biggest potential disruptor has not yet even come into play. Amazon, the most feared of all web based retailers, and the pioneer of the simplest buying experience, is the player who could have huge impact should they enter personal financial markets.
Enablers
Enablers, on the other hand, provide new technology to existing institutions, accelerating their digital transformation and arming them to compete with disruptor upstarts.
Three factors put FinTechs on a collision course with traditional banks.
- Financial Service Institutions (FSIs) are under siege from the disruptors like Fundera with small business loans and Everbank for personal deposits that offer convenience, high levels of service, and low cost of doing business.
- At the same time, consumers expect ever increasing levels of convenience, anytime/anywhere access, and simplicity of their banking experience. This is where FinTech’s shine, and where tradition banking processes are necessarily slow to keep up.
- The millennial generation target is the prime new business opportunity, and millenial comfort and fixation with mobile devices means banking must be offered with mobile convenience.
The result is that traditional banks will need the help of FinTech Enablers to offer the same convenience, features and mobile service that the FinTech Disruptors are bringing to market.
What does an Enabler do for a bank? By adding services outside of the core banking process, an enabler can jump start a traditional bank and accelerate their customer-centric digital transformation, even if the main business model has not changed. An example is digital customer acquisition. A user engagement layer that allows consumers to apply for loans and deposit accounts on mobile devices, without changing the core banking systems, can bring a bank to market with new digital offerings in far shorter a time than a complete digital overhaul of back office systems.
So the smart banks will realize the time-to-market is everything, and look to FinTech enablers as a source of agility. In this context, agility means offering customers the mobile digital services they demand, tailoring to very specific target markets, and doing it in weeks or months, not 2-4 year cycles. Agility means rapidly adapting to the desires of the market, measuring results, and adjusting. And reality shows that FinTech specialists can do this faster and more effectively for banks than the banks can do it themselves.
