Whilst it could be argued that the origins of fintech lie with the invention of the credit card in the 1950s, the sector as we know it has been on the rise since innovative start-up businesses emerged following the 2008 financial crisis.
Growth continues at a pace and has accelerated massively due to COVID-19. According to Raconteur, the first period of lockdown (March - July 2020) saw 66% of people regularly using financial technology, which was up by more than half compared to the same period in 2019. Following a year in which physical gave way to contactless and digital-first, how is fintech set to accelerate in 2021 and how will the more traditional players in the sector keep up?
The fintech revolution
So what is it about fintech that has enabled a start-up boom and allowed disruptors to challenge traditional banking institutions? Whilst the challenges they face aren’t insignificant, whether securing funding, navigating regulations or keeping pace with new technologies, start-ups do offer many benefits that can fluster old-school providers.
They are clearly more agile than big banks who have to grapple with legacy infrastructures and processes in their quest to meet the needs of more sophisticated, digitally-savvy consumers. Disruptors move fast and use new innovative technologies to strategically target the most profitable parts of the market. Their processes have been designed for digital from the outset, whereas incumbent banks have the burden of re-designing legacy systems and continuing to service the less profitable elements of the business.
Many fintech start-ups burst through with ‘bolt-on’ digital solutions for specific needs, but over time have been able to blur the lines and offer broader banking and financial services to compete with mainstream providers. Businesses such as Monzo have outgrown their early adopter status and challenger banks like Starling have joined the fold, developed sophisticated marketing strategies and grown to become trusted banking providers for millions of consumers.
Where are the roadblocks?
One of the key challenges highlighted by experts in recent years has been the need for greater interoperability in the financial services sector to support a frictionless experience for consumers with varying financial needs. Allowing people to access transaction and payment services easily, irrespective of provider or account, would facilitate the level of service and ease of use that consumers expect.
With such a vast uptake in technology and digital solutions since the pandemic outbreak, getting payment products to be ‘interoperable’ is essential if digital services are going to deliver the experience consumers desire. Businesses within the sector will come under greater pressure from users to provide solutions that integrate well with other resources, or face losing out to competitors that meet those needs.
Another challenge is finding a unified approach that has the right balance between digital and human. Whilst many of us are comfortable using digital channels for our banking needs, others aren’t. Irrespective of how tech-savvy you are, when you need reassurance or guidance on a more complex issue, most prefer to speak to a real human. Whilst seeking to take full advantage of digital and cloud-based technologies, providers still need to show the human side of their brand.
Is technology the key differentiator?
According to Toptal, one of the biggest trends driving fintech, aside from the obvious developments in technology, is the growth in customer expectations. Following the financial crisis and various high-profile banking or misselling scandals, treating customers fairly is now front of mind and strongly reinforced by hefty fines from the FCA (Financial Conduct Authority). Consumers rightfully scrutinise financial service providers and hold them to account, putting greater emphasis on transparency and trust than ever before.
Newer financial start-ups may not have brand awareness but position customer service as their key USP, combined with innovative technology to create platforms that are simple, easy to interact with and just a tap away from responsive customer support. Older institutions clearly have the advantage of an established customer base and brand identify but have been slow in adapting to the times, with clunky contact options and bureaucratic procedures, but it doesn’t need to be this way.
Where to next?
A possible bridging solution in the form of fintech-as-a-service platforms seems to be a likely next step for technology specialists and financial start-ups. This emerging trend will enable fintech start-ups to partner with larger institutions to benefit from brand awareness, compliance and trust, whilst in return providing those institutions with easier access to new innovations. Through these platforms, providers that aren’t yet in a position to adopt state-of-the-art technology, will be able to evolve their business models by partnering with fintech businesses.
One thing is for sure, this sector will continue to see major disruptions for some time to come, driven by new innovations, shifting business models and ambitious new start-ups out to grab market share.
At The Telemarketing Company we have worked with many early-stage, high-growth, funded businesses in the fintech sector and others, helping disrupt markets, test propositions and establish brands. Our flexible phone-based services enable providers to integrate human interaction alongside digital channels to deliver an exceptional customer experience and remain compliant. If you would like to discuss how we could support your growth strategy, get in touch.
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