Until recently, it was the fintechs keeping the banks up at night. But as the incumbent-fintech dynamic moves from disruption to collaboration, the threat of big tech is growing.
Fresh research from Barclays highlights the fact that fintechs and banks are now more interested in collaboration than competition.
The driver for this enhanced level of cooperation is raised customer expectations, with consumers that have become completely accustomed to a seamless personalised experience in all other aspects of their digital lives. They fully expect the same in financial services.
A single entity – whether a fast-moving fintech or banking behemoth – will struggle to provide this and so new collaborative models built upon banking-as-a-platform foundations are emerging, offering multiple services.
As the conflict with fintech dies down, a new battle with big tech begins. Apple has made many headlines with the launch of its new credit card, while Facebook attempted to launch a digital currency, Libra.
There are examples of collaboration. Amazon, for instance, is in talks with Goldman Sachs to offer small business loans to its US customers and is also dipping its toes into current accounts in partnership with JP Morgan.
But what happens when the big tech companies go all in and become banks themselves, taking deposits, making loans and approving mortgages? The GAFAs (Google, Apple, Facebook, Amazon) have perfected digital engagement across multiple verticals and touchpoints; they know how to deliver exceptional customer value and experiences.
And it’s not just the GAFAs that threaten the traditional banks but other big techs such as Alipay (Alibaba), WeChat Pay and Uber Money. The IMF has spoken of a significant disruption to the financial landscape by big techs, who can draw on their wealth reserves to offer smarter financial products and services based on Big Data and artificial intelligence (AI).
Who will win the hearts of consumers? For now, incumbents still have the advantage when it comes to customer numbers, helped by ongoing apathy towards switching. However, this status quo is unlikely to remain.
The truth is that banks are generally ill-prepared for the massive changes about to be brought by the entry of Amazon, Google and other tech giants into their industry.
They need to refocus on offering services and products that their customers actually want and, more importantly, need. Rather than offering one-size-fits-no-one products, they would be better looking at services that can be tailored to individual groups – and not just the usually-cited Millennials. Think freelancers, gig economy workers and so on.
In order to do that, they will have to rethink not only their core technology, which in many cases is rapidly becoming unfit for purpose, but also their whole approach to serving customers. If they do that thoroughly, it will most likely lead to an overhaul in ways of working, processes and product development.
ezbob can help with this journey. Contact us today to see how we can help you to overhaul your lending systems and re-imagine the customer experience.