Outstanding service and effective marketing are the means by which Fintechs are turning a conservative industry upside-down.

The Fintech Revolution will not be televised

The shotgun wedding between high-tech renegades and venture capital that has disrupted so many industries of late has the financial services industry in its crosshairs, and its weapon of choice is the Fintech. Short for “financial technology”, Fintech is an umbrella term that’s commonly used to describe disruptive financial services technologies.  Fintech is slowly but surely transforming the way money is managed, and it affects almost every financial activity, from banking to payments to wealth management.

The very nature and business model of providing branches in every single town is going to change.

“The very nature and business model of providing branches in every single town is going to change,” claims Scott Belous, managing director of digital client experience at TD Ameritrade. “Gradually, the number of services that require a visit to a physical bank will dwindle, and you will slowly cross the things off the list that you used to have to go to a bank branch for, which removes low-value interactions such as questions about a balance and replaces them with more impactful conversations about how best to meet the client’s financial goals.” The downside? Fintechs are still learning how to address issues like cybersecurity, data security, and privacy protection. These are make-or-break issues – because of their reliance on big data, fintech companies are increasingly attractive targets for cybercriminals.

Playing chess, not checkers

We need to understand that banks and fintechs don’t speak the same language.

Startups and legacy banks face different challenges. Startups and fintechs are rebooting financial services processes from the ground up, and established financial services firms are scrambling to keep pace and roll out new products of their own. They often invest more heavily in innovation, but they haven’t yet fully spread their innovation throughout their organizations. “We need to understand that banks and fintechs don’t speak the same language,” says renowned bank innovation consultation expert JP Nicols. “The people getting promoted in banks are used to asking lots of risk management questions on what happens when this or that goes wrong, thinking upon layers over layers of risk management. Because they are rewarded for preventing things from going wrong and not for taking risks that can transform and grow into something new, innovation suffers. In contrast, what’s successful in fintech is taking risks. So it is just fundamentally different.”

There are three ways that legacy banks have responded to the fintech challenge so far. Some banks have chosen to go with a “wait-and-see” approach, standing pat until obvious technology winners emerge. This no doubt sits well with their more conservative stakeholders and board members, but these banks risk being caught with their pants down when the threats to their business become impossible to ignore. The second group of banks goes out and spends copious amounts of cash to buy up fintech firms in order to gain access to new technologies. But due to different mindsets and technology mismatches, they have often have trouble with integration.

The third group makes the decision to spend massive amounts of time and money to fix up their existing IT landscapes, which are typically fragmented and full of legacy systems that are nearly impossible to maintain, let alone upgrade. The idea seems to be to replicate the approach of a fintech internally by establishing innovative and agile teams that can quickly create new offerings that emphasize digital features such as mobile, social media, and data analytics. But it’s easier said than done, as these expensive internal teams are typically stuck with with creaky infrastructure, regulatory burdens, and a culture that hates risk and change.

The conversational commerce difference

One easy way that banks can keep up with fintechs without incurring a lot of risks or costs involves borrowing strategies from social media’s biggest innovators – many of whom are moving into payments. In America, Facebook messenger allows for free money transfers, while peer-to-peer payment app Venmo now has a social feed that allows users to acknowledge payment with emojis. Under a new service agreed to by 20 banks in Singapore, customers can exchange money directly on Facebook or Twitter without the hassle of dealing with sort codes and account numbers.

Paying through Facebook and Twitter is a great example of conversational commerce – and according to Finance Digest, there are four key ways that banks can use it to add value. These include getting to know customers personally (creating new CRM opportunities and providing new ways of obtaining more meaningful data about them in the process), recommending new products to customers via a chat-driven interface, offering customers creative ways of carrying out basic banking within a social context, and helping customers take charge of their finances via smart technology and apps.

Bringing customers Closer

We’ve built Closer to be the ideal conversational commerce platform, providing an instant, multi-channel messaging experience that pays real dividends for financial institutions.

We’ve built Closer to be the ideal conversational commerce platform, providing an instant, multi-channel messaging experience that pays real dividends for financial institutions. By supporting desktop and mobile browsers while offering a mobile app that provides customers with multiple communication methods and a comprehensive interaction history right at their fingertips, we make it easy for customers to get in touch and stay in touch wherever they happen to be. And after standard business hours, our sophisticated AI takes over and proposes the best means of interaction, routing the conversation to the most capable people and providing them with the info they need to make the best possible offer to the customer.