Increased competition and customer demand for convenience and personalization are transforming financial services and creating new opportunities for collaboration between FinTech and traditional financial firms. Jason Simon, a specialist in FinTechs and eCommerce, explains in detail how partnerships with FinTechs is the perfect key to take financial services to the next level.
According to a global FinTech report published a few years ago, the rise of FinTech continues to revitalize the customer experience in financial services. However, many of them have found that they are alone in their battle for success. Because of the complementary strengths, they bring to the table, FinTechs are increasingly interested in establishing a symbiotic partnership with the traditional financial services firms they once sought to unseat.
Simon examines how FinTech is transforming the user experience in financial services, focusing on the customer and the use of new technologies. He also looks at the potential for symbiotic relationships between them and traditional financial institutions and the growing role of big tech in this sector.
“Through their technological innovations, FinTechs are enriching the customer experience of financial services,” says Simon. “High competition and increasing consumer demands generate a growing demand for simplicity and personalization. FinTechs are using customer data to deliver personalized solutions and digital services that are fast and available 24/7 via any type of device.”
However, financial services customers trust traditional brands more than FinTechs. FinTechs are finding success thanks to a customer-centricity philosophy that corrects the shortcomings of traditional entities. These shortcomings opened the door for FinTechs, but trust in traditional entities remains important to customers.
Freed from the burden of traditional corporate systems and cultures, FinTechs have leveraged new technologies to respond quickly to customer demands. According to the report, 90% of FinTechs point to providing agility over legacy systems and improving the customer experience as their key competitive advantages. Seventy-six percent point to their ability to develop new products and services and their application of innovation to existing products and services.
Their challenge now is to create economically viable business models. Although FinTechs have raised close to $110 billion in funding since 2009, the report reveals that many could ultimately fail if they do not create an effective collaborative ecosystem as they face challenges such as expanding into other markets, building customer loyalty, and containing operational costs of scale.
At the same time, traditional financial institutions are adopting many of the FinTech-driven improvements in customer services, without neglecting their characteristic strengths such as risk management, infrastructure, regulatory expertise, customer trust, and access to capital. Certainly, FinTech and traditional entities will win in unison with a collaborative and symbiotic relationship.
“More than 75% of FinTechs consider their main business objective to collaborate with traditional entities. This is why it is critical for both to transform their models through collaboration to drive innovation while maintaining customer trust,” explains Simon. “Without an agile and committed collaborative partner, traditional institutions and FinTechs set themselves up for failure.”
According to the report, more than 70% of FinTechs report that their main concern about collaborating with traditional financial institutions is their lack of agility. In contrast, for traditional firms, it is the potential negative impact on customer trust, brand, and internal culture change.
“The future of financial services is in the hands of FinTech and traditional institutions, which can complement each other’s strengths to meet customer expectations and redefine the customer experience,” adds Simon. Although the great uncertainty is related to the disruptions that may come from big tech, what is clear is that it is now that fintech and traditional entities must find the most suitable collaborative partner and redefine their model of progression.