Fintech Disruption: Creating Opportunities for Financial Institutions

Consumers demand more from their relationships with financial institutions than ever before. They expect these organizations to know them, understand their needs and wants, take a vested interest in their well-being, and provide choices that are personalized just for them.

In recent years, financial institutions have struggled with their ability to adapt to the expectations of today’s customers. Older technologies are being pushed to the max to compensate for the lack of ongoing investment. Add to this the increasing pressure from competitors and regulators, and these factors may leave financial institutions unwilling to explore advanced technologies, emerging payments, and/or open banking solutions.

Digital commerce and payments have been exploding exponentially for some time—and the need to accelerate digitalization has only been exacerbated by the global pandemic. Simultaneously, consumers’ expectations are heightening as they grow accustomed to hyper-personalized commerce experiences and the need for contactless service options. Leveraging the right technology at the right time can help financial institutions meet customers exactly where they are, delivering a better payment experience while encouraging long-term loyalty.

Conversational Touch Points

Consumers now exist in a digitized world as hyper-connected beings, craving technology and the choices it creates. 85 percent of Americans own a smartphone, and 15 percent of Americans use smartphones as their primary means of accessing the Internet. And the amount of screen time Americans spend on their mobile devices has been increasing steadily in recent years—to 5.4 hours daily on average, up from 3.33 hours just three years ago.

Consider, too, that Amazon’s Alexa, along with other virtual assistants, is a relatively new technology. In 2016, there were 130 skills for Alexa; in 2019, there were already over 100,000. And it’s expected that in 2021 the number of smart speaker users in the U.S. will grow by 13.7 percent to 83.1 million. Voice-activated payments are an important part of this skill set. It’s estimated that by 2022, 31% of all payments will be made via voice-response technology.

These statistics show that the way consumers make payments and interact with businesses is evolving at an expeditious rate. Voice-response and conversational commerce further the dimensions of choice and personal preference, elevating the overall level of satisfaction that consumers now expect. This high level of device ownership and mobile engagement presents a powerful opportunity for financial institutions to reframe the impression that “all banks are the same” by leveraging these channels to revolutionize the customer journey.

GAFA Disruption

The “Big Four” tech companies (Google, Apple, Facebook, and Amazon) are also disrupting payments and becoming a threat to traditional financial institutions. These companies drive loyalty by creating real connections to people and their daily lives, meeting their needs with seemingly limitless options. Their huge customer bases supply the data needed to study and understand what motivates consumers. Add to this the economies of scale they create through forward-thinking technology, customer engagement, and lower prices, and financial services are the next natural step in their journey. Done right, the Big Four could have an impact on traditional financial institutions by connecting a single customer’s personal experience to an integrated global payment and financial services ecosystem.

How to Turn the Tide

Start by answering, what has your financial institution done lately to invest in your customers’ expectations? If you’re only offering traditional payment options, are they enough? Are you invested in, or considering investments in, enhancements like digital channels, APIs, open banking, and artificial intelligence (AI) technology? Traditional financial institutions need to start thinking like fintechs, taking risks, and challenging the status quo. This can be done both internally and through partnerships with industry disruptors.

Making payments easier, faster, and with less friction is a key way to simplify the customer journey.  For example, faster payments are a ripe opportunity to get ahead of the curve. Faster payments coupled with real-time data are game-changers for both the customer experience and financial institutions seeking a competitive edge. Customers want instant gratification, so taking hours, or even days, to settle a payment is simply too long. With so much data and information available in seconds, there is no reason for the speed of payments to remain outdated.

Data and analytics are also at the heart of this transformation. By analyzing internal metrics of payments and customer interactions, financial institutions can gain better insight into customers’ likes/dislikes, wants, and needs. This data can extend to AI, machine learning, and other advanced analytical tools. Which can provide opportunities for greater personalization and channel optimization in the future.

The first step in this journey is to evaluate existing digital solutions to determine if upgrades are required. Viable fintech partners can help financial institutions transform legacy systems and create advantages including, scale, stability, and trust. They can also provide deep expertise in navigating compliance and regulatory requirements.

Now more than ever, a personalized customer experience is a MUST. Now is the time for financial institutions to move from a product-focus to a customer-focus by providing cutting-edge technology, building trust, and embracing the power of choice. 

For more on disruption, read the article, Turn and Face the Strange Changes in the Payments Industry. 

*This is an update on an original post published April 2019

Today’s legacy and siloed banking technology infrastructure limit financial institutions’ ability to rapidly innovate. It’s time to look at money movement in a new way. Alacriti’s Orbipay Unified Money Movement Services does just that. Whether it’s real-time payments,  digital disbursements, or bill pay, our cloud-based platform enables banks and credit unions to quickly and seamlessly deliver modern digital payments and money movement experiences.  To speak to an Alacriti payments expert, please call us at (908) 791-2916 or email info@alacriti.com.