5 Fintech Trends Disrupting Retail Banking (And How Banks Can Fight Back)

Pretty much everyone agrees on this: Millennials don’t find traditional banks very appealing. In fact, the vast majority of Milliennials (71%) would prefer to visit the dentist than a bank. So it’s no wonder that a wave of new fintech apps and services have so easily found the traction that they have. The success of fintech startups has been largely driven by their ability to capitalize on Millennials’ dissatisfaction, allowing consumers to sidestep traditional banking providers if/when their expectations aren’t met.

But traditional institutions shouldn’t just throw in the towel. Those with a commitment to measuring and improving the customer experience of banking consumers will be in a good position to fight back against this wave of fintech insurgents. Here are five ways they can fight back.

1) Quick Money Transfer Apps

Almost everyone is familiar with the frustrations involved with trying to transfer money from your personal bank account to someone else. A few years ago, completing a money transfer in under five minutes would be essentially impossible. But even with all the technology we have at our disposal today, it can still be incredibly difficult for a consumer to use the technology available at their primary bank.

But a new crop of services emerged to take the pain out of transfers. PayPal, Venmo, Square Cash and others like them allow consumers to link their credit cards or bank accounts and make quick P2P transfers. While set up takes a bit of time (and all parties involved in a transaction must be signed up for the service), repeat use makes paying friends back for things movie tickets or last night’s round of beers extremely quick and easy.

Millennials have come to expect such an experience. Many banks and credit unions are starting to realize this, but they’re a little behind the eight ball. For instance, traditional institutions (including Bank of America, PNC, Chase and others) are working on Zelle, a Venmo-like app created to work with traditional banks and credit unions.

2) Chatbots and Messenger-Based Payments

Soon, you’ll be able to pay for that used TV you found on Craigslist by texting the seller directly from your phone’s messenger app, including Apple which turned on the Messages payments functionality in June 2017. This emerging new technology trend sidesteps any experience that would otherwise involve a retail bank in some way (paying by check or credit card, for example).

In the future, you can expect all banking brands to offer their own chatbot. It’s important to understand the weight this new touchpoint carries in terms of customer service. For example, customer may no longer have to wonder when refunds and payment adjustments will be implemented as communicated to you from that messenger experience- the bots will update them automatically.

3) Forget the Card, Pay With Mobile Devices

These days, you don’t even need to bring your physical wallet to make purchases at brick-and-mortar stores. Technologies like Apple Pay, Android Pay, Samsung Pay, (etc.) let you connect a credit or debit card to your smartphone or smartwatch. On its own, this doesn’t seem like much of a Trojan horse for banks, but as more people shift behaviors so too will the expectations of banking customers. And with the global mobile payments market estimated to hit $3.4 trillion by 2022, it’s worth monitoring in relation to banking customers.

4) Smart Budgeting and Personal Finance Management

Traditionally, banks were among the first places people considered for managing their wealth and investments, which made upselling retail bank customers into investment products a natural fit. These days, though, that’s not always true. For nearly a decade, services like Mint.com and Personal Capital have given you a better way to stay informed about your financial decisions by linking your spending behavior (via a bank account) to their platforms. You can see how much money you give Starbucks every month, or provide an easy path for saving money for special occasions.

Knowing how bank’s own tools stack up against third-party rivals like Mint can make a huge difference, with the potential to increase loyalty among current customers or convert prospects frustrated with another traditional bank’s poor, or lack of, personal finance management experience. And of course it also decreases the chance that those same prospects find something that isn’t connected to their bank as closely, thus creating uncertainty when trying to measure the entire customer journey. Also, those integrations might also create other complications with a retail bank’s ability to track and measure traffic.

5) Digital Currencies That Don’t Require Central Banks

Bitcoin, a cryptocurrency or digital currency uses advanced encryption to regulate units of value and transfer funds without the need of a central bank. Mainstream banking consumers aren’t exactly chomping at the bit to use forms of payment like bitcoin right now, but little by little it appears to be gaining traction as more and more people dip their toes in the bitcoin waters. It would be a smart move for banks to identify if a portion of their customers are utilizing cryptocurrency in ways that intersect with their own customer journeys, and to better understand how it impacts their overall satisfaction. (And highly satisfied customers are 64% more likely to remain loyal to a brand.)

Bottom Line: While the pace of fintech innovation is unlikely to slow down anytime soon, retail banks aren’t defenseless against the threat of losing customers (or potential customers). The only way to mitigate that risk is by focusing on what matters most: the customer. The more banks understand the motivations and expectations of their customer base, the easier it will be to calibrate business strategies to remain competitive for decades to come. Having a proven methodology in place to accurately measure and manage customer feedback is a sure way to bank on delivering a winning customer experience.

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