The new landscape often pits banks against FinTechs – but many incumbents are taking a page from their modern counterparts to stay relevant and grow.

Technology has been influencing every industry, including finance and banking. A new wave of financial technology (FinTech) companies has been revolutionizing the payments landscape — and consumers have been taking notice. EY’s Global FinTech Adoption Index found that consumer adoption of FinTech services has soared from 16% in 2015 to 64% in 2019. Meanwhile, 68% would consider a non-financial services company for financial services, which represents a clear threat to traditional banks.

As FinTechs increase their hold on the banking industry, legacy institutions must adapt if they want to survive. “Business as usual” won’t cut it with today’s demanding consumers who now expect faster, more efficient service from their providers. Digital solutions are the new preferred format, with EY finding that 60% of users would prefer to view all their products within a single app or online tool.

If banks want to keep up, they need to embrace the digital tools that FinTechs deploy so successfully. But for banks to adopt, they must overcome some challenges.

The Challenges Banks Face Today

Traditional FIs likely have an online presence, but it is not the focus of their operations — and this shows when it comes to new digital ventures. Consumer appetites have changed so quickly that legacy institutions struggle to keep up. The digital operations they do have are often decades old and therefore impossible to reconfigure for changing priorities.

Today’s customers expect quick and easy communication with their providers, yet many banks have inefficient online contact forms or perhaps no point of online contact at all. Without a convenient portal for customer communication, many banks are missing an opportunity to better understand their target audience.

Another issue arises when banks try to mimic their entire product offering online. While many services can be successfully conducted through digital formats, not every offering can or should be brought over to mobile. For that matter, if a bank waits until it boasts a full-service online platform, it could miss out on the digital boom altogether. Prioritizing on-the-go access to services that customers use most, is critical to a bank’s future success.

How Banks Can Emulate FinTechs

Although acclimating to our new digital banking world can seem challenging to traditional payment service providers, they do well to take a page from modern FinTech companies. FinTechs are not restricted by expensive, outdated infrastructure, so they’re able to pivot as needed to serve the changing demands of their customers. They can trial and deploy new solutions at scale because they prioritize flexibility throughout their organizations. In particular, they have adopted a few key characteristics that traditional payments firms would be wise to emulate.

Be Customer-Centric

Banks have thrived for a long time, so they are confident in their business offering. Though that confidence can be a double-edged sword, as it may blind banks to shifting customer interests and expectations. Instead, banks should focus on the consumer, understand their priorities, and serve their changing needs. In other words, investing in upgrading the services customers value most (even if they’re not yet the most lucrative) will reap long-term rewards.

Encourage Internal and External Feedback

The market is evolving so quickly that it’s impossible to accurately predict every twist and turn. But market unpredictability doesn’t need to be a problem if companies are listening to feedback and can course-correct as needed. Feedback, whether internal or external, can provide valuable insight into what is and isn’t working. Constructive criticism can redirect the business towards success, and also demonstrates concern for collaborative improvement, which in turn fosters loyalty across employees, partners, and customers.

Address Infrastructure

Payments companies need to act fast to keep customers engaged. As such, it’s often beneficial to deploy select digital services as soon as possible, rather than attempt to digitize everything at once. For long-term success, however, organizations cannot neglect their core infrastructure. Alongside their fast-moving implementations, they need to overhaul their framework piece by piece so that it can support future innovations. Once the backend matches the end-user applications, banks will be in a great position.

Partner with FinTechs

From their growing market share, it may seem like FinTechs are banks’ main competition. In reality, a FinTech-bank partnership would create a significant opportunity for mutual benefit. The newcomers may have tech-savvy and nimble structures, but the legacy players often have the resources and industry know-how. By partnering together, banks can gain access to the latest technology while helping to support developers in areas of mutual interest.

A FinTech Future

Consumers have embraced a digital world. Soon, it may be that there is no such thing as just a “finance” company, that every business will be a FinTech company in some shape or form. For now, banks would be wise to identify their technological weak spots and turn to FinTech experts for guidance and partnership.

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