How customer centricity is revolutionizing the Fintech world? Costs & Regulation.
Savvy digital consumer
Customer centricity has been driving innovations in the Financial Services. The savvy digital consumers wanted more personalized services that increase convenience and retain security. Shifting from product thinking into customer-centric offerings needed agility, speed, and the ability to innovate. Monetizing social media platforms became an opportunity to diversify firms’ income especially by engaging the millennial consumers. Fintech firms emerged as a result and were funded by venture capital and banks. The Fintech funding has grown from US$ 12 billion in 2014 hitting all-time high in 2015, reaching US$ 19.1 billion globally.
Banks vs Fintech firms
Whereas banks had liquidity, customer base, reputation for trust and stability, and experience with regulators, the Fintech firms lacked in those areas. At the same time, Fintech companies had the capacity to innovate, less regulatory pressure, agility, technology expertise, and absence of legacy systems, which banks had little of each. Partnering between Banks and Fintech companies became in many cases win-win scenarios and a way for simpler and more rewarding user experience.
Fintech revolution results
The Fintech revolution has resulted in Contactless Cards, Mobile Payments, Wearable Apps, improved Mobile Banking, Mobile only-Banks, and Cardless Cash at ATMs. Consumers benefited from this change by enjoying cheaper and improved quality of financial services. The online lenders that lean on banks for funding enabled obtaining loans online seamless, cheaper, and easier. They found different ways of assessing risks such as social media, utility bills payment history, and sophisticated algorithms. Mobile has changed the way people shop. Retailers realized they have to make online product search and shopping journey for customers informative and least frictionless. Banks have harnessed new technologies and are playing an important role to create sustainable programs and reach the underserved. As per the World Bank’s Global Findex 721 million adults gained access to new financial accounts from 2011-2014 and most of those accounts were opened in banks. The increase of access to affordable financial services through mobile will improve the lives of the unbanked through better saving options, access to credit, and cheaper remittances. The Fintech also played an important role in helping on demand business such as car booking services, grow.
Fintech revolution came at costs
Although banks have a huge lead in lending but they are still under pressure and watching Fintech startups closely. Several banks posted shrinking revenue in Q1 2016. They are either partnering together to profit from deal-making, or with startups to explore into relatively new technologies such as Blockchain and Robo-advisers. The first can reduce the time and cost to process transactions, and the second can help retail investors manage portfolios with no or little human intervention. However, the Fintech revolution came with undesired costs as well such as an increase in card Fraud globally, especially online. The investments in innovations to acquire and retain customers outpaced the ones to combat fraud and cybersecurity issues. Banks are having no choice but to make biometrics as a priority. In addition, many Fintech startups ended up in shutting down and laying off staff either due to failing to generate profits or to other reasons such as legal.
Fintech startups regulation
Regulators, especially in the countries with major financial centers are keeping themselves updated with the latest developments in Fintech. They are trying to manage innovations without stifling them while making sure to protect consumers and investors and keep the financial system stable. They are aiming at putting a framework to Fintech by harnessing responsible innovations that need to be sound, reliable, and have the potential to promote growth, efficiency, and competitiveness. The collaboration and acquiring will seem to continue between banks and Fintech firms. At the same time, regulatory collaboration efforts are set to increase between countries. Converging on standards for the Fintech transformation may reduce duplicate investments in several areas and create more successful alliances. The result could be a more integrated financial world that would enable people and businesses trade more goods and services, and transfer money across countries, cheaper, with more convenience, and at less risk.
Meet the Author
Maher gained his banking and payment industry expertise at Citibank and American Express. He later attended industry events on Payments and Blockchain and expanded his experience to retail industry. Maher is providing his opinion among the evolvements in the Payments space.