Fintechs Win on Experience, Banks on Trust
May 26, 2021
By: Kate Drew
Fintech companies are winning on experience. According to new data from McKinsey, consumers are more likely to see fintech services as easy to use, convenient, and able to deliver on digital when compared with traditional institutions. While not necessarily shocking, this news has two important implications. First, it suggests that, despite all of the work traditional banks have put into digital in the last year especially, fintechs are still ahead when it comes to serving up the tools and features customers want, in the way they want. And second, it means that these companies are starting to develop a reputation among consumers that will be hard to compete with.
Traditional banks poured money and resources into beefing up their digital capabilities throughout 2020, and many are still in the process of completing or executing on those projects. Part of the problem is that these banks generally turn to the same handful of vendors when looking to upgrade their products and services, while fintechs tend to build their own propositions that incorporate customer feedback on an ongoing basis. That is extremely hard to compete with, because it is so incredibly tailored. Many banks, especially smaller ones, simply don’t have the development talent to employ that kind of strategy. However, they don’t have to take what they’re given right out of the box either. A number of digital banking vendors today offer customizable solutions that allow the bank to tailor products and services to their customers’ needs. If you’ve heard the word “extensible” at all in your journey, that’s what it is referring to. These solutions offer the ability to build on top of their offerings, adding and removing features as needed. This is quite critical because it can help a bank not only keep up with fintech competitors, but also avoid putting out the exact same thing everyone else has.
Banks today are in a tough spot, but finding differentiation is not impossible. Yes, it will require a little more work, and possibly, a handful of good developers. But there are solutions out there being built with agility in mind. It’s time to stop taking things at face value and instead look for potential. McKinsey also found that, while consumers generally still trust banks more, fintech companies are not far behind. As these startups begin to gain more trust, eroding that key advantage for traditional players, it’s going to become even more important to meet their bar on experience. That bar is only going to get higher; flexibility will be key to moving in tandem with it.