What the fintech?

Following the financial crisis, much has been written about the lack of trust that exists between millennials and traditional banks, fuelled in part by the negative experiences of the previous generation. Faith in money as a concept has been fundamentally damaged and there has been an explosion of new and innovative tech-led financial solutions, online banks, and virtual currencies. In a financial world characterised by innovation and shiny new solutions at every turn, the certainties of old are anything but certain. A society whose worth was built on commodity, on owning lots of ‘stuff’, is rapidly being replaced by one that rewards freedom and choice, where there’s absolutely no penalty for veering off the beaten track.

Out with the old

In the past, it felt necessary to have your main account with a traditional high street bank, where there was something reassuring about being able to go into a branch or to have your own dedicated bank manager to talk to. Now, despite any initial concerns over placing money in a virtual bank, the ease of use, intuitive functionality, and sheer efficiency have encouraged even the most loyal traditional bank supporters to venture onto the other side. This shift is being driven by a clear focus on the customer experience, delivering value, and stripping away any unnecessary layers of complexity. 

Digital efficiency

Efficiency is integral to perceived customer value. Challenger banks like Starling have mastered the art of opening a bank account (with full identity verification) almost instantly, from the comfort of your sofa. Business or personal bank accounts can be opened and fully functional within a matter of hours, where traditional banks are taking weeks to achieve the same outcome. The fast and nimble nature of tech startups means that they can respond quickly to market demands and are adapting their offering in record time. 

Traditional banks are putting up a mediocre fight,  they’re innovating just fast enough to stay in the game, but never at a pace to become market leaders. But do they need to be? I would argue that the reason they are struggling is through trying to win the wrong race; it’s not about the 'fin' or 'tech', it’s all about the customer. 

Creating Value

Steve Jobs once famously said, ‘You have to start with the customer experience and work back to the technology, not the other way around.’ Large, traditional banks can’t be the hippest kids on the Fintech block, but they don’t have to accept their fate as the next Blockbuster either and watch themselves get booted out of the financial marketplace for becoming entirely irrelevant. 

It’s not about how you make things faster, but how you generate more value. This is where even the most nimble of fintech startups can fall down. You see, one of the key traits of tech people is that they like to make tech. Sometimes that tech solves real problems for real people in amazing ways, and sometimes it just exists. Often this is driven by a need to satisfy investors who are keen to see digital transformation in progress, other times it’s simply a knee-jerk reaction to what others are doing and a big case of FOMO. Either way, it’s bound to fail because it isn’t grounded in two fundamental tenets; delivering value to the customer and in a way that is profitable to the business. If traditional banks want to win back the trust of the emerging market, they’ve got to start showing that their actions are driven by an innate desire to address their needs and not simply to keep up with the Joneses.

Back to the drawing board

Many digital transformation projects in finance fail because it is assumed that the digital transformation itself will deliver the desired result. Often, it is bolted onto an existing (usually outdated) system in the hope that the added technological wizardry will somehow magically solve some key (and often longstanding) challenges that the business is facing. 

In fact, digital transformation is rarely the solution. Rather it is an enabler that helps you create the best possible outcomes for your customers. Put simply, if you don’t know where you’re heading in terms of delivering customer value, you can’t possibly know what digital transformation projects are required in order to align with this business-critical goal. 

Putting the customer at the centre

Putting the customer at the heart of your strategy is essential to devising an offering that truly meets the needs and wants of the modern customer. First and foremost, you need to ask fundamental questions about what people want from financial service providers. You will probably have to strip it right back to what financial services actually are, as the pace of change means this definition is constantly evolving. 

Next, you need to get under the skin of your new markets. This includes evaluating your recruitment strategies and actively employing people who are your target market (insider knowledge is priceless). You should also undertake detailed UX research, consider your service design, and take UX design seriously. It’s all very well having a fancy-looking product but what really matters is how this visual design impacts the user experience. 

I’d really recommend looking to fringe technologies and solutions for inspiration: crypto, microloans, money transfer, jamjar accounts, peer-to-peer finance, credit unions, and marketplace platforms. Adopting best practices from both inside and outside of your usual circle of influence can help to identify new ways of thinking while fostering a real culture of innovation and idea generation.

Finally, embrace innovation, don’t just pay lip service to it. Invest meaningfully in the medium- and long-term. It is common for mature FS companies to experience declining growth as innovation is replaced by stagnation. Consistent long-term growth needs to combine a focus on existing businesses whilst also allowing sufficient space to explore how to grow in the future. McKinsey’s Three Horizons of Growth provides some really useful insight into this specific challenge. 

In summary, FS products are no different from any other products - customer value is king. To focus on this you have to use modern product management techniques: customer research and collaboration, agile development, data-driven strategy, empowered delivery teams, and flat management structures. Forget 'fin' and 'tech', success lies in incentivising anything that makes your customers love your products more, what used to be important is no longer relevant. 

About the Author

Aidan Dunphy is the founder and Principal Consultant at Samepage, a digital consultancy focused on transforming business through the strategic deployment of the right digital tools. For more information visit https://samepage.digital