Not that long ago, it was banks acquiring fintechs. Now, a fintech has bought a bank: BM Technologies plans to buy Seattle’s First Sound Bank for $23 million.
Whether this is the start of a major trend depends on the resilience of financial institutions. Banks need to be fighting fit to compete with disruptive, agile and well-funded newcomers.
The problem is that cost efficiency at US banks is running at between 60 and 65% on average, and if you’re carrying excess inefficiencies, squaring up to fintechs on key issues like rates, fees and customer-centric service is all but impossible.
All successful fintech businesses have two things in common: a product or service that is precision-targeted to their actual customer base and a lack of legacy systems – technological or human – to hold them back. Even when they become subject to the same regulations as established institutions, these advantages remain in place. Their business model is cheaper by design.
The first line of defense for banks and other financial institutions is to eliminate those inefficiencies that weigh them down. That’s the basis of the Backbase Engagement Banking Platform and the single-platform approach to preventing, and even reversing, banks’ loss of position in the market.
With a single platform you can power all your lines of business and all functions from one future-proof system – that’s everything, from everyday banking for longstanding clients to digital sales of innovative new products, across retail, business and wealth management. You can identify where and how to become more cost efficient – an all but impossible task when effort is duplicated over discrete, disjointed systems.
We also believe that financial institutions shouldn’t just interact with the people they serve: they should truly engage with them – a concept the challengers and disruptors have made central to their operations.
A single platform allows you to put customers at the heart of your business. You get to see them exactly as they see themselves: as a fully 3D individual with various intimately connected financial needs that change over time – not just as a line of code or a cell in a spreadsheet. The results can be far-reaching. Clients tell us that their employees have a more engaging experience, for example, which has cascade effects for customer service.
Today’s systems also plug into existing core banking systems with ease and enable you to integrate with the fintechs you want to collaborate with. You can even take them on at their own game by using the platform to develop the apps and digital solutions that many customers want but currently can’t get.
It’s still too soon to say whether First Sound Bank is a rarity, or the premonition of a more digital and disruptive future. But it does illustrate the fundamental truth of today’s highly competitive financial landscape: US banks cannot rely on reputation and tradition to retain their standing. It’s time to shape up – and it’s easier than you think.