Roughly 60 percent of Americans believe that traditional banks and financial institutions are not keeping up with their needs and will ultimately disappear in their lifetimes. This is one surprising statistic from a recent survey by Blumberg Capital, a San Francisco based early-stage venture capital firm (and one of Trulioo’s investors) and conducted in association with Regina Corso Consulting.
It’s not as if the need for financial entities will disappear but, if the survey is correct, the way people will interact with finance will change dramatically. Seventy percent of Americans believe that new solutions such as digital banking, online lending, payments and financial services, are making financial transactions easier than ever. Americans, in general, are positive about many aspects of fintech: 74% believe it will give them more power over finances, 65% believe it will give them access to more services and 69% believe it will help everyone be better off financially.
Of course, there are issues with the transition to using the new financial tools. The biggest concerns are with security; 72% are not completely confident their financial information is secure or private.
All these numbers echo a global sentiment; according to an EY 2016 Global Consumer Banking Survey, 40% of customers express both decreased dependence on their bank and increased excitement about what alternative companies can provide. Of the 32 markets in the survey, Nigeria leads the way with 67% already using digital-only, nonbank financial products and services in the past 12 months.
Both surveys point out the biggest issue for banks revolve around customer service and delivering customer focused solutions. In the survey, 80% of Americans agree that financial institutions need to focus more on helping the average consumer and small business owner. And, in the EY global survey, only 26% believe that the banks provide unbiased advice.
People are increasingly turning to digital solutions in all aspects of their lives, from hailing a ride through Uber to booking a room from AirBnB. They enjoy the speed, convenience and simplicity that digital interactions bring. It’s no wonder that consumers want to embrace the same in their financial lives.
However, it’s not enough to simply deliver the same bank services through a digital channel. There’s no differentiation in that and EY found 41% of customers indicate they would not hesitate to change financial services providers if they found one that offered a better online/digital offer/experience.
Fintech offers banks ways to improve the customer relationship. Simplify and clarify their offerings, rates and fees. Improve their range of products and services with more focus on various consumers and small business needs. Ease account setup and management. Improve communications to deliver better quality of service.
Fintech also offers ways to improve the back-end functions, so that banks can put more efforts into building customer trust and loyalty. Trulioo’s CEO and Founder, Stephen Ufford, states:
“As fintech adoption grows and larger volumes of money are transacted online, fintech companies are adopting RegTech solutions to meet mandatory financial regulations, such as AML and KYC obligations, while effectively serving their customers across borders and jurisdictions. We’re proud to be have three of the top five payment gateways in the industry leveraging our global identity verification platform solutions to help automate processes so they can focus on innovation.”
As David Blumberg, founder and managing partner of Blumberg Capital, says; “Banking as we know it is coming to an end.”
But that doesn’t mean the end of banks. If they emulate fintechs and embrace innovation, focus on improving the relationship with customers using the new channels of communication, and invest in understanding and serving the needs of modern clients, they can not only survive, but thrive, in the new era of financial technology.