Why it’s time to reimagine banking in this digital age

There’s no disputing that the UK is the firm leader of the fintech sector in Europe. Funding for firms in the industry in this country outpaced that of Germany by a staggering 398% last year. In fact, investors pumped £550 million in to UK fintech companies in 2015. It’s easy to see the sector’s appeal; the fintech industry generated around £6.6 billion for the UK economy in 2015 and employs 61,000 people in this country.

This fintech industry took off as firms looked to improve efficiency in banking and eradicate the complicated infrastructures of technology that have been used for decades in the financial services sector. So many of the fintech businesses that are emerging in the UK and abroad exist to facilitate and improve the status quo. That is why the giants of banking such as RBS and Wells Fargo are focused on creating close relationships with and, in some cases, investing in such start-ups.

Many of the innovative companies in this sector are examples of organisations that are the first in their field to create specific kinds of financial technology. For instance, Currency Cloud has built an extremely efficient operation in London with fewer than 80 employees responsible for processing billions of pounds’ worth of transactions every year, and trusted by some of the fastest-growing businesses in the world, including foreign exchange firm Travelex.

Other fintech companies are going a step further. Remittance company Azimo’s approach to the global transfer of money cuts out the middle man and reduces transaction fees for people living abroad and sending money back home. They are often transferring money to developing countries and the savings made available to them can prove to be crucial.

So how does the traditional banking industry keep up in this ever-evolving, disruptive market? Here I outline the key three things the traditional financial services industry needs to think about in order to keep pace:

1. A hybrid approach - The rise of new technology innovations has increased business complexity due to old, legacy IT systems combined with the introduction of new IT. Banks don’t have time to keep up with new, agile start-ups who are disrupting the traditional model. High street bank branches have seen a 32% decline in visits since 2011 as consumers turn to online methods and payments being made via apps has risen to 54%. However, it’s important to remember that things like mortgage applications are easier to deal with by having a face-to-face consultation. That’s why a hybrid approach is needed and banks should look to combine technology with the human touch.
2. An emphasis on trust – With new technology, come new and evolving risks. Earlier this year, HSBC suffered an online banking cyber-attack and with financial malware attacks increasing, security systems need to be ready to defend their customers’ most personal details. There needs to be a significant emphasis on getting people to trust in the financial services sector. Customers leave payment details in the hands of the banks and need to know firms are investing in ways to keep their data safe.
3. Putting customers first - Banks must improve both new and existing services by putting customers at the forefront. With constantly evolving customer demand for more convenience and ease, every new product or service should be able to solve a specific problem or request. Routine banking tasks can now easily fit around busy lives, by just a few taps on an app and start-ups are capitalising on the demand economy by solving customer bug bears such as expensive currency exchange fees.

In a world where people are more likely to trust their employer than their bank, both traditional financial organisations and new fintech start-ups need to put the customer at the forefront of their innovations in order to succeed in a very competitive marketplace.