Every once in a while, someone or something comes along to help us maximize our potential. For banks and credit unions, that something is financial technologies companies, better known as fintechs. Despite being in their infancy — relative to traditional financial institutions, at least — these organizations have established themselves as major players in the FI space. Unlike other entities, which burn hot but flame out shortly thereafter, fintechs are clearly in it for the long haul.
"Between 1,450 and 1,500 fintech businesses are in operation worldwide."
Evidence of fintech's success and staying power include the number of people globally who not only know of at least one fintech company by name (96% of polled respondents can say as much, according to a biennial survey conducted by Ernst & Young), but have leveraged one or more of their services. Indeed, 3 in 4 respondents say they've taken advantage of fintech products or their capabilities, such as money transfer or online payments. Many of these individuals use fintech regularly; the global adoption rate of fintech in 2019 was nearly 66%, a dramatic surge from the 16% rate of adoption in 2015, the same poll found.
They've also grown considerably, with between 1,450 and 1,500 fintech businesses worldwide, according to figures compiled by Fortunly.
What has allowed fintechs to flourish? While they may be banks and credit unions' chief rivals, following in fintechs' footsteps can provide traditional FIs with a successful pathway forward as they adapt to consumer behaviors and optimize their service technologies.
Lesson No. 1: Be the greatest at one or two services
As we've said many times in the past, banks have long aimed to be all things to all people by providing as many financial services as possible. While this has worked to varying degrees of success, fintechs took a different route by focusing on one or two specialties. For instance, as pointed out by the Forbes Financial Council, fintechs have differentiated themselves by honing in on a specialty service, such as fraud prevention, risk management or price forecasting.
"Doing one thing exceptionally well has allowed fintechs to establish a greater presence in the FI industry."
Doing one thing exceptionally well has allowed fintechs to establish a greater presence in the FI industry. This has enabled fintechs to increase name identification and minimize operational expenses.
Banks and credit unions may want to consider examining their processes and identifying which need to be improved. With mobile banking on the rise and full-service branch locations dwindling, FIs may want to invest in ITM technology. These tools proved to be lifelines for several banks that had them in place during the pandemic.
Lesson No. 2: If you can't beat them, join them
Some banking leaders view retail banking as a zero-sum industry. If one organization grows — be it in the form of customers or ITM locations — another automatically loses. Fintechs have gone about things differently by recognizing that everybody can win by working together.
As such, many fintechs have partnered with traditional banks. For example, the peer-to-peer payments platform Zelle formed alliances with dozens of community, retail and commercial banks all around the world. By doing so, Zelle became one of the most widely used money transfer providers available. In the process, banks have benefited by increasing convenience for their customers and refining their digital capabilities.
Bottom line: Strategic alliances with other FI entities can make a lot of sense both in terms of customer satisfaction and tech adoption.
Lesson No. 3: Double down on digital
While Western Union may not technically be a bank, the company's longevity (established in 1851) is largely a function of its ability to adapt and recognize trends early when the writing is on the wall. As noted by TechCrunch, Western Union enhanced its digital investments more than 10 years ago, entering the digital payment space well before many fintechs even existed. Instead of Western Union trying to keep pace with fintechs, fintechs are the ones in catch-up mode. By shoring up their digital operations several years ago, the company's digital money transfer revenues skyrocketed in 2020, climbing nearly 40% to $850 million.
Shelly Swanback, president of product and platform at Western union, told TechCrunch that WU's foresight and intuition is what has helped the company establish a foundation that has led to great results, beating fintechs at their own game.
Whether you're aiming to join forces with fintechs or dial up your digital offerings, it's never too late to get started. BranchServ Convergint will get you up to speed with the customized solutions that can help you put your best branch forward on an ongoing basis. Contact us today to learn more about how we can help.