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Fintech Banks In Us – As Bill Gates said: “Banks are necessary, but banks are not.” And this is the truth. Digital financial technology aims to improve the lives of consumers, and Fintech disruption is already happening in the banking industry. Let’s find out how it started and what banks can do.
At first glance, with the largest banks controlling nearly $17 trillion in assets, the $132 billion Fintech industry looks like beans.
Fintech Banks In Us
It should be noted that retail banks spend $30 billion annually on digital transformation, which is not so impressive compared to Fintech’s $132 billion.
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It is clear that Fintech disruption is in full swing in the banking industry, and the trend is gaining momentum and reaching across all financial sectors. Banks and the traditional financial sector have seen little change over the past 20 years. Bank managers hesitate to welcome changes and new technologies in the banking industry. Some may disagree and argue that banks have come a long way over the years, but in reality, all improvements are made for the bank’s profit, not the customer.
Online banking has reduced the need for frequent visits to bank branches. It changed the way we view banking services, not the banking model itself.
Online banking probably wouldn’t happen if accountants didn’t realize that the cost of maintaining an online banking system is much lower than a branch office.
Going online is a strategic and profitable move for banks. Unfortunately, just because you’re online doesn’t mean you’re successful. On the other hand, Fintechs protect customers better than any bank with a suitable and effective online strategy.
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Firstly, Fintech disruption started in the banking sector during the last financial crisis of 2008. Former financial sector workers who lost their jobs were not ready to leave the financial sector. They partnered with IT experts to create Fintech startups that solve human problems instead of banking problems.
Due to the economic crisis, trust in traditional banks has been damaged and everyone wants to save and manage their money. This is a huge opportunity for the digital industry, and new customer-centric financial services are starting to explode.
Second, we live in a digital age that opens up many opportunities for the financial industry. If you look at the most valuable brands of 2022, you will find five tech giants. The digital age requires a completely new approach and mindset – 100% customer-centric.
Mobile banking removes barriers to market entry, creating demand for financial services regardless of location. According to a study by Business Insider Intelligence, 89% of consumers today use mobile banking services, and Fintech offers solutions to bank customers that allow them to compete with banks.
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Fintech breakthroughs in the banking sector have brought us better financial management tools, mobile payments, crowdfunding, instant loans, peer-to-peer lending and even Insurtech (insurance technology) solutions. All this was made possible by bright minds who came together to understand the importance of design thinking and creating services in an environment where banks are struggling. Fintech innovators understand the real-world difficulties customers face when banking.
Fintech startups understand that splitting banking services and owning at least one of them will bring them recognition and maximum customer satisfaction. This is where banks fail with their online services. Many things are too complex and extremely confusing compared to user friendly Fintech and Insurtech user interface designs. Some Fintech and Insurtech have a design vision that traditional financial institutions lack, and that vision is about a delightful customer experience.
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Fintech and Insurtech owners see digital services through the eyes of their customers. They choose to focus entirely on their customers and create products that they themselves want to use. Banks, on the other hand, focus on better loans, fees and branch locations, but consumers value convenience, affordability and ease of use. That’s why crowdfunding and loans are rapidly gaining popularity. Starting a Kickstarter campaign and getting the necessary funding for a product is easier than going to a bank branch and asking for a loan. The same scenario is happening with digital-only neobanks, which have attracted millions of customers over the past few years.
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More and more customers are choosing Fintech products, and banks are losing more and more customers. This is because such banks believe that they already have well-built products, so why should they change anything?
The same goes for quick loans, personal finance management tools and Insurtech services. Almost all online banking services have personal finance management tools, but have you found them or tried using them? Probably not because you don’t even know they exist, and even if you tried to use them, you’d probably be put off by their complexity. Then there’s Mint’s success story of how a perfectly simple Fintech design helped create a personal finance management tool. Mint does what it needs to do in a simple, beautiful and comfortable way.
We only have to open the App Store to see how digital consumers compare traditional banks to digital-only banks.
In recent years, we have witnessed a revolutionary change in the customer experience of banking. According to Citi’s Mobile Banking study, 91% of customers prefer to use mobile banking over visiting a branch. A Capgemini study found that 68% of consumers say they currently use a checking or savings account from a competing bank, or are likely to within the next three years. The top three reasons for switching to fintech services are lower costs (70% of respondents), ease of use (68%) and faster service (54%).
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All the above statistics show that Fintech design and UX (User Experience) are helping to disrupt traditional banking. If we compare the monthly user activity (BUY) figures for the top Fintech and banking apps, we see a sharp change between 2016 and 2019. According to App Annie, Fintech took only three years to bring in billions of dollars. Banks.
Banking may be difficult for some customers, but life without them would be brutal. Banks are not going to go bankrupt or disappear, but most people agree that they need to change. Most established banks already have the foundation to offer new services – the challenge is to implement the customer experience design in the bank.
According to McKinsey’s Global Banking Annual Review 2022, there is a 70% valuation gap between banks and other sectors. And only half of the valuation gap reflects the low profitability of the banking sector, the other half reflects the lack of expected future growth, which is reflected in the low P/E ratios of banks. Banks have a P/E of around 13, compared to an average of 20 in other sectors – and the discount is rising. Banks lack a systemic growth view for the entire sector, leading investors to discount a sector that lacks the growth premium of other sectors.
Only banks that create long-term value (Sao Bac Dau) will do well both in terms of high profits today and growth in the future. A high P/E implies high long-term growth expectations, while a high price-to-book (P/B) ratio reflects short-term risk-adjusted profitability. These banks are relatively rare: worldwide only about 15% of banks qualify as Sao Bac Dau. Their estimates are two to five times higher than others.
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Shifting from a product-centric mindset to a more customer-centric approach to service design was identified by 79% of respondents as a top priority in a Finextra & Virtusa survey of more than 100 bank executives operating banks in North America, Europe and Asia Pacific region.
Improving the digital customer experience is a challenge from traditional banking models and cultures. It requires a customer-centric approach to providing financial services that welcomes customers with the help of banking technology.
Today’s digital consumers have higher expectations than ever. To succeed, financial firms must be innovative to attract and retain customers through relevant and personalized experiences across multiple channels. One of the best ways to do this is to integrate design thinking not only in processes, but also in the culture of the organization.
Fintech specialization enables better customer focus and increases customer value and business valuation. McKinsey’s analysis shows that high-tech specialists and fintech companies are – not surprisingly – active in profitable banking products, including deposits, payments and consumer products. This remains true after the 2022 market correction, which does not change the order or size of the spreads.
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New financial technology is giving consumers the freedom to switch financial services faster than ever before, and this is only accelerating open banking initiatives. The task of the banks themselves is to open additional services and ultimately put customers in the business they do. Having excellent online customer services is a positive step towards achieving this goal.
We see more and more traditional financial companies such as banks collaborating with Fintech and Insurtech companies and integrating them into their ecosystems. This is a great approach to drive Fintech and Insurtech UX innovation and implementation
