In today’s innovative age, financial service customers now can complete almost all financial activities online. There has been a great expansion in digital banking services recently, pushing banks to think creatively as to how they can keep up with these fintechs.
Some people prefer going to a traditional bank to complete transactions, while many these days are attracted to digital financial services, especially in 2021 where the pandemic has kept people in their homes. Fintech firms have found a way to adapt to the needs of the customers very well, providing them with the whole package: fast, efficient, and relatively cheap services.
It will be tough for traditional banks in Europe to compete with fintechs, especially the fintech giants like Klarna and Revolut. Traditional banks are quickly realizing that they need to step up their game and find out what it is exactly that their customers need to do so; Keeping up with the changing customer demand is going to be crucial.
One way that traditional banks can keep up with fintech firms is to improve the customer experience as a whole. Millennials are the prime customers these days, so understanding their wants and needs is crucial to success. Millennials have been raised in a time where they do not need to wait for anything — a smartphone or computer can do any task within minutes. This means that they are constantly looking for the best option through the internet. Wanting a simple solution is something that fintechs have latched onto and become very good at.
Appealing to the customer is the best way for banks to stay in the game. A traditional bank tends to draw customers in by offering them a range of services at a reasonable price. The World Fintech Report states that 90% of fintech firms declare that enhancing their customer experience has been key to their competitive advantage against traditional banks. In addition, traditional banks will need to improve their branding techniques. Fintechs do a great job of appealing to the customer through modern marketing tools like gamification and the expensive use of social media.
On the other hand, banks have been around a very long time, meaning they have a great knowledge of the historical process, giving them a competitive edge. While fintechs have created a newer form of infrastructure, banks can go back to their roots, improving the techniques that have been around since the beginning.
Looking at data insights, customer preferences, and the most cost-efficient solutions will be the best way for traditional banks to compete with these digital financial service companies. It will be interesting to see how things roll out in the next couple of years in the banking industry; Will traditional banks be able to hold onto their customers or will they crumble under the fintech industry’s growing power?
Alex Graham, CFA. “Fintech and Banks: How Can the Banking Industry Respond to the Threat of Disruption?” Toptal Finance Blog, Toptal, 5 Oct. 2017, www.toptal.com/finance/investment-banking-freelancer/fintech-and-banks.
“Digital Battle: Bank Customers Demand More: Banking.” FinTech Magazine, fintechmagazine.com/banking/digital-battle-bank-customers-demand-more.