In the battle for financial services dominance, it seems that incumbents are managing to hold off FinTech disruptors.
Sure, FinTechs are driving innovation throughout the industry. But a closer look at market share shows that disruptors aren’t unseating incumbents in the competitive landscape.
Market share aside, disruption is an ever-present challenge for incumbent financial services brands.
You have two options—view disruption as a burden and take a defensive approach; or see it as an opportunity and adapt proactively.
Getting to the Heart of Financial Services Disruption
Mobile, blockchain, artificial intelligence, cloud computing. These are the technologies being used to disrupt traditional financial services.
But that’s not news. For years now, financial services leaders have worked to fill the gap between their legacy systems and the innovative technologies FinTechs use to disrupt the industry.
You’ll never get out ahead of competitors if you’re always playing catch up with the latest technology. Instead, you have to look at what really drives these FinTech disruptors. Consider this simple list of ways FinTechs are disrupting the industry:
- New lenders want to make credit more accessible and offer better terms
- Payments innovators want to streamline transactional processes
- FinTechs in all sectors aim to create a more transparent, inclusive industry
Look at what these three points have in common. It’s not a certain disruptive technology or trend. The heart of financial services disruption is the pursuit of a better customer experience.
It’s easier than ever to replicate tech innovations and financial products. The brands that are proactive about the evolution of consumer expectations will survive disruption—no matter who enters the market.
Financial Services vs. Big Tech—Claiming the Opportunity
There are certain platforms that make it possible for incumbent financial services firms to deploy the same technology as FinTechs.
Whether it’s Amazon with AWS and Alexa skills, Facebook with Messenger and integration with the main app, or Apple and Google with mobile platforms, incumbent financial brands are building their futures on rented land.
“The partnership between banks and large tech companies risks not staying a reciprocal one. Financial institutions increasingly rely on technology firms for their most strategically sensitive capabilities, but can so far only offer their ongoing business in return.”—Jesse McWaters, Project Lead, Disruptive Innovation in Financial Services at World Economic Forum
For a long time, incumbent banks and insurance companies didn’t have to worry about this relationship disrupting their businesses. The margins are often low and regulations are cumbersome to say the least.
But things changed when news broke that Amazon might enter the financial sector. Suddenly the relationship between your brand and the Big Tech companies felt different. What if they’re taking advantage of your data to strategically disrupt your industry down the road?
This is a problem we see a lot in the travel industry and it applies directly to the competitive financial services landscape—if you don’t own 100% of your customer data, you’re taking a major risk.
Building the best financial services experiences on someone else’s platform may help you in the short-term. However, a few years later you’ll still be struggling with disruption as a burden to your company.
When you take control of innovation, the customer experience, and your customer data, you can start looking at evolving technology as a boon, not a burden.
Innovative Experiences Aren’t Just for FinTechs
“Successful firms disrupt themselves.”—Walt Bettinger, President and CEO of Charles Schwab
Now is not the time to sit back and react to the disruption of your industry. Being a fast-follower is one thing, but turning disruption into an opportunity means being proactive about your customer experience.
You have the product positioning, financial industry experience, and existing customer databases. Now you just need to build up the kind of trust and digital equity that disruptors are thriving on.
If you want to learn how to win the hearts and minds of modern financial services customers, check out our free white paper, The Financial Digital Executive Playbook.