While the coronavirus pandemic has been a difficult time for everyone in terms of safeguarding our health and learning to live with restricted social freedoms, it has undoubtedly afforded us an opportunity to revolutionise the way we work.
Major financial institutions are all too aware that they can’t afford to bury their heads in the sand, especially which many of these Fintech firms are succeeding by offering solutions to the big bank’s own shortcomings.
So let’s have a look at the areas in which Fintechs are giving big banks a run for their money and if there is anything they can learn from how their fledgling rivals operate.
The dawn of online banking was a solid step towards improving convenience for customers, helping to limit the need to traipse into your local branch to set up direct debits and transfer money.
However, while it took high street banks decades to get to grips with the internet and introduce online banking, in the relatively short time since the advent of the smartphone Fintech firms have revolutionised how customers move their money - particularly amongst millennials.
Younger generations have embraced person-to-person payment (P2P) apps like Venmo, which allows direct transfers to be made within seconds, making it far more convenient for things like splitting a restaurant bill between friends.
In fact since launching in June 2017, popular US payment app Zelle has already processed more than 320 million transactions, valued at around £72bn.
The success of these apps is not just due to convenience, but also a result of how simple they are to use, with many making instant payments as simple as sending a text message.
Large financial institutions could certainly learn a thing of two when it comes to their own customer-facing apps, which are often needlessly complicated for the daily requirements of the average user.
These institutions may find it serves both them and their customers better to strip down some of their offerings in favour of adopting a sleeker, more intuitive design philosophy, with a focus on features like one-touch payment solutions.
Another defining trait of Fintech firms is their ability to quickly adopt new advances in tech as well as adapt their services to the needs of their users.
For example, French Fintech firm Shine took note of the growing gig economy and started offering specialised services to freelancers, including helping with legal registration or making tax payments (both major headaches thanks to France’s strict labour laws).
The flexibility to add extra incentives and services that actively reflect changes in technology and society is one of Fintech’s major strengthens, thanks to smaller firms not being beholden to the legacy processes that encumber their larger peers.
Many Fintech firms will then build on this momentum by making these value-added services a major part of their brand identity, which in turn attracts additional users.
Many financial institutions have begun to recognise they are not nimble enough to play catch up with their new rivals and are starting to seek partnerships with Fintech firms.
This allows some of the big banks to offer the same wide range of customisable services without being tied down by the possible complexities of overhauling their legacy software.
While advances in technology may have led to the emergence of Fintech, its meteoric rise has certainly been hastened by the financial crisis 10 years ago.
The ensuing chaos and collapse of a number of financial institutions has shaped today’s customers to expect a certain level of transparency when it comes to their money.
However (despite their best efforts) many big banks still fall short of these expectations, leading Fintech firms – who often pride themselves in their openness and user-friendliness - to appeal to consumers who have become disillusioned by the traditional institutions.
For instance, many small businesses are increasingly turning to Fintech firms thanks to the extra clarity they provide.
Many small business owners value Fintech’s mantra of making things clear and simple, such as providing greater transparency when it comes to funding applications and providing information on exactly why a business loan may have been rejected.
While this may be the area in which the traditional financial institutions have most struggled, by embracing Fintech’s more transparent business models and simplifying their services there’s certainty a chance for them to catch up.
While Fintechs have stolen the spotlight in recent years, some traditional financial institutions are closing the gap at startling speed.
Those currently having the most success are exploring collaborative partnerships with Fintechs, like J.P. Morgan Chase & Co which partnered with Fintech start-up OnDeck Capital to launch a new digital lending platform using technology.
Fintech companies are all about convenience, adaptability and transparency, and by reflecting on what customers love about the Fintech companies they engage with established financial institutions can make these learnings part of their own success stories.