While traditional banks may have once seen fintech companies as their enemies, it is evident that the universal stance on financial services is changing rapidly and both customers and banks alike can see the benefits of incorporating these emerging technologies into their offering.
Carl Strempel is the CFO of Imburse Payments. He is a chartered accountant with over 10 years of experience in multinational corporates and knows first-hand the challenges that aged payment solutions cause. Here, he talks about how the future of banking is being shaped by fintech partnerships and tailored solutions:
Traditional banks have been particularly challenged by the technological revolution over the past few years. Not only are there faster, more effective technologies ready to be implemented, but there is a growing demand for banks to modernise current systems in order to better fulfil customers’ needs.
Holding on to legacy systems, however reliable they might be, blocks access to a whole range of opportunities that banks could, and should, take advantage of. Rather than a safe and stable solution, an old IT system is now a barrier that impedes banks from offering competitive digital services and requires an exorbitant (and avoidable) amount of money to maintain.
By being able to easily deploy new products, such as AI, robotics or cloud-based services, banks can attract new customer bases whilst improving customer loyalty, therefore gaining a meaningful advantage over competitors. This can only be done through completely scraping their decades-old traditional systems and investing in new digital platforms or, alternatively, through partnering with fintech’s who already offer the technology that banks are looking for.
The fintech industry, though highly competitive, has also become a common ground where big banks collaborate with smaller enterprises in mutually beneficial partnerships. The scope of these partnerships is varied and there are several reasons why collaborating with other financial companies can be immensely advantageous.
Amongst others, fintech companies can help banks to easily deploy the latest technology stack, to acquire or expand customer channels, particularly reaching younger audiences that are digitally driven, and to improve the digital customer experience overall. These are indispensable for a financial ecosystem that is now fully centred on technology, and banks are understanding that.
Take the payment sector, for instance. Payment is a crucial function within banking and a great connector between the bank and the consumer. Yet, it is a function that can easily be neglected. A seamless and fast transaction shows customers that their bank offers effective services, which might be the reason why a customer decides to keep an account with their current bank, instead of looking for other banks to open an account with.
The global digital payments market is expected to grow by 19.4% from 2021 to 2028, reaching $236.10billion by 2028. This rise in digital payments’ popularity is something we witness in our daily lives, with increasingly more businesses focusing on cashless transactions and more customers using online payments.
Following this trend, there is now a rich variety of product offerings that make the payments market hugely competitive and force banks to invest in the latest technology to better serve their customers. However, there is more to it than simply pressure from competitors. Adopting a cloud-computing multi-payment system allows banks to have unrestricted access to other markets and countries, expanding their services to bigger customer bases quickly and effortlessly, therefore improving their global connectivity.
Because cloud-computing payment processes are done fully via the Internet, this eliminates some major hindrances that banks face when planning to scale their services. Cloud computing cuts out the need for infrastructure, reducing both infrastructure and operation costs, as well as any other general operational processes that a physical system would require. Scalability and flexibility are now imperatives if banks want to stay ahead of the game.
In the payment sector in particular, there are various features that can be implemented in order to fulfil and exceed customers’ expectations. Banks have the chance to be at the forefront of payment innovation simply by partnering with companies like Imburse, who offer integration to the global payment ecosystem including access to payment technologies and partners worldwide. This allows banks to provide customers with fast and seamless transactions and ultimately, it gives them the flexibility to deploy payment technologies in a matter of minutes and stay ahead of the market at all times.
Another valuable advantage that cloud computing offers to banks is the possibility to store and analyse any amounts of data. Data collection and data management tools are indispensable features, as they permit banks to store information about their customers that they couldn’t otherwise access. This database can be analysed and used for the purpose of product development and/or marketing strategies and it allows for a much greater insight into customer behaviour and future trends. Without it, banks would be blindly launching services and developing campaigns, potentially wasting a lot of money and resources.
Personalisation of services
In today’s world, the customer dictates the product offering and currently, customers are expecting to receive hyper-personalised services that are relevant to their needs and effectively solve their problems. Banks need to jump on this bandwagon sooner rather than later if they want to maintain their customer base and acquire new audiences.
Hyper-personalisation is established both on the marketing side, to connect with customers through tailored content, and on the product side, to offer customised services and meet customer expectations. In order to achieve this, banks need to use their databases to determine what services their customers need, or might need, throughout their lives, including, for example, buying a house or entering retirement.
In an industry known worldwide for being disruptive and competitive, collaboration has been proven to be key in maintaining a top position in the market. fintechs and banks are able to learn from one another, with fintechs benefiting from a reputable regulatory system that banks have established over decades, and banks benefiting from the technological innovation that fintechs provides. Through partnerships, both sides are then able to keep up with the challenges of the Finance industry, continuing to offer pioneering solutions to their customers whilst complying with market regulations and working for the greater good.