Defining fintech as an opportunity, not as a threat
“Silicon Valley is coming,” warned Jamie Dimon, JPMorgan Chase’s boss, in a recent letter to shareholders. It’s a sentiment echoed across much of the banking world at the moment.
The idea that fintech is a threat to the financial services sector is bubbling – a 2015 PwC survey found 83% of financial services professionals were worried about losing business to upstart fintech companies.
There is no doubt that fintech has been a disruptor across the financial services industry. The former chief executive of Barclays Bank in the UK has described the technology as an “unstoppable force” and he’s right – the fintech revolution has taken hold, but contrary to common concerns, it is not a threat. It is one of the greatest opportunities for banks to change the way they deliver services and products in the application economy.
Investing in and developing software is the critical success factor here for banks, and the only way to keep pace with the rapidly changing industry and the challenge thrown by fintech innovators, who describe themselves more as technology companies than financial services players. As banks transition from traditional financial services organisations to ones driven by software applications, planning, building, managing and securing applications must be the key priority.
The planning phase for new services needs to be a key area of focus. Fintech organisations are putting immense pressure on banks in terms of new digital services, tight timelines and dwindling budgets. By investing in the right agile management solutions, banks can combat this threat, transforming the way they plan, execute and manage critical operations and ensuring they first identify the areas of demand and then build the apps that respond to them. This ultimately powers the future of their business.
Listening to customer’s feedback is equally important, in order to continually improve the app and the experience customers receive. By monitoring behaviour such as dwell time, banks are able to edit and optimise app functionality accordingly. Take Barclays’ Pingit app, for example, which allows the development time for new services to be minimal, by learning from the existing app. It’s not only cost effective, but reduces the time to market and because of user feedback, increases the likelihood of the app being well suited to its customers first time round.
Crucially, banks also need to ensure these new digital services are secure: protecting the banking services from internal and external threats and engendering the kind of trust that keeps customers coming back.
There’s one more advantage to this revolution, namely, the increased focus on opening application programming interfaces (APIs), which allow banks to open up their internal systems to third parties, to exploit new services delivery.
Indeed, the European Commission has mandated it as part of the Payment Services Directive (PSD2), which calls on banks to standardise the way services are shared and allows faster payments, better consumer protection and a wider choice of services.
Banks have a chance to create a strategic advantage out of their compliance efforts, accelerate digital transformation and put the customer at the centre of the market. Armed with the right solutions, banks could become third party providers themselves, for instance by selling complementary services to customers, leveraging disruptive trends like wearables or the internet of things (IoT), and beginning to manage digital identities.
In a world where it’s no longer enough to sell on the basis of extended branch opening hours or detailed account statements, banks must embrace innovative digital services and offer customers a more holistic and engaging experience— from the internet and mobile, to the few remaining bricks and mortar branches.
By adopting a “can-do” attitude, implementing the right processes and investing in the right software technologies, banks can innovate the next generation of services that keep customers coming back and take full advantage of the fintech revolution.
By Duncan Bradford, VP, EMEA, CA Technologies