Finance Monthly April 2020 Edition

Some may say that this loyalty could also be translated as long-term customers’ reluctance to change banks, but in reality, that ability to change banks has never been easier. Instead, analysts are beginning to believe that there is a deeper-rooted loyalty between the customer and banks than previously believed. And this, despite the catastrophes around 2008, is down to their trust in established institutions. TRUST Bricks and mortar buildings, whether or not they’re entered or used, seems to give customers a sense of security and trust that a digital bank - turning your money into air - can’t. FinTechs are admitting that banks still retain trust from customers a decade on from the financial crisis. With many believing that banks will be successful in managing a recalibration, even if the process may be uncomfortable. Although, that trust mustn’t be misplaced and they shouldn’t be complacent about this ‘captive’ group. They need to be understood to an even deeper level and recognise how their interaction and requirements of their bank changes throughout their own life. Nothing is guaranteed and banks must continue to work hard to retain their customers, building further trust and confidence. CUSTOMER BASE There’s an obvious observation to be made that outlines both the basis for trust and also for the possible advantage that established banks retain. They’ve been around for decades. In that time, the banks have accumulated streams of data from large groups of existing customers. In comparison, the start-ups and disruptors have a limited customer base to both build and develop data insight from. Some would go as far as to say that they also lack the ability to truly scale too. Data is the oxygen of the developing financial system. Back in 2017, big banks took over 2 years to read, listen and learn from a client relationship. This may be improving, but digital banks have continued to shorten that timeframe dramatically. If big banks can begin to analyse their data in real-time with the right internal structures in place to act quickly, then they can remain competitive and not lose too much ground. SIMPLICITY The disruptors understood one thing: simplicity. They offered low-cost solutions to niche customer groups and made it easy. From onboarding to client servicing, they had identified where established banks had over-layered simple decision-making to create complex processes. So, by using streamlined digital processes, AI and machine learning, they were able to steal a march on the establishedbankswith thosedisgruntled, but digitally savvy customers. Borrowing the approach the disruptors had taken and combining it with the mass of data from an established customer base should make the ‘big’ banks smarter; using data-driven insights to recommend products, services and advice across the entire customer journey. However, big banks, like big oil tankers, are hard to turn. TRANSFORMATION NOT TECHNOLOGY The slow turning is, in part, due to oil tankers having legacy infrastructure that’s still generating business and revenues, but the big banks acknowledge that they need to change and accelerate developments. However, banks must avoid tech-for-tech’s sake. Some would say that so much tech has already been thrown at problems without any real impact. Antony Jenkins, former Group CEO of Barclays has said: “People now want change, but we have to move beyond innovation to genuine transformation”. NO NEW PRODUCT “We have thousands of start-ups’,’ says Pepe Olalla, BBVA Compass Head of Business Development, “but all they are doing is offering the same type of products in a different way”. And he’s right. There’s not been a disruption in the products that the FinTechs are offering, it is all in the better delivery of the products that already exist. Per Christian Goller, CEO at Aprila Bank, Disruptors have found more than 2.5 million customers and USD $1 billion in funding since 2014, however, they all still remain outsiders within the global economy. FINANCIAL INNOVATION & FINTECH - DISRUPTORS 22 www.finance-monthly.com