Financial services in 2019 - collaboration and consolidation
High street banks across the UK and Europe are under a lot of pressure. Neobanks, such as Starling, Monzo and Revolut, are challenging the status quo and are showing up traditional banks when it comes to digital first, seamless digital experiences.
For some, this indicates that the days of established high street banks are numbered, their outdated, clunky and slow processes no longer relevant in a world where people expect a customer experience as seamless and easy as using Uber or Amazon. But I don’t think that’s the case, these banks still have a large customer base, and the vast majority of people trust them. What they do need to do however, is to improve their customer experience so that they can avoid losing customers to the challengers.
But this change won’t be born out of banks themselves. Genuine collaboration with fintechs will be a necessity this year.But this won’t be collaboration like we’ve seen it before. Because up until now, collaboration has largely been a failure. Particularly when it comes to fintechs and banks working together.
Past “innovation” partnerships between banks and smaller fintechs have typically fallen by the wayside, with newly created products and services hindered and let down by their execution. This has been down to a number of factors, whether it be legacy infrastructures, outdated and long-winded processes, or people and staff resistant to change. Because in a company with thousands of staff members, innovation can be hard to embed across the board.
But genuine collaboration is beginning to take centre stage - and it’s largely to do with the rise of the Starling, Monzo and Revolut, which have increased customer sign-ups and value.
The competition is also getting fiercer elsewhere. With the likes of established financial institutions such as Goldman Sachs moving into this space with the launch of Marcus. This has established players worried, despite none of these entities succeeding in attracting full-time users - for now.
What’s clear is that banks now need to move quickly and build their own propositions, which they hope will stem the potential rise of the new challenger. What we’re finally seeing, and will see more of this year, are joint budgets and ventures between financial institutions and fintechs, which will then be launched independently as stand-alone businesses. Therefore bypassing the processes, thinking and people that mean organisations are slow and lumberous.
These new fintechs will have a larger degree of autonomy, unshackled by the burden of larger organisations and will combine an already established consumer base with the agility fintechs enjoy. This can be seen with the likes of Unicredit, which has already launched an iPhone only-bank called Buddy Bank in Italy, while a number of other tier one banks such as RBS are looking to launch their own, separate offerings.
This is an admission that banks now can’t do it alone. And it’s down to the fact that, while they offer a number of services, they’re struggling to innovate and stay relevant on their own. But that doesn’t indicate failure. What these high street banks - of all sizes and reputation - need to do, is find the right fintech partner. Banks have strength in the services they’re offer, but are hindered by the ability to do everything. Fintechs offer the opportunity to provide the best of both worlds - services developed by specialists in a particular niche with the best technology available.
Genuine collaboration will be the enabler to kick start a defence, and ensure they can compete with the rise of the neobanks.
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