What can financial institutions learn from fintechs?
It’s safe to say that the Australian banking sector is at a huge crossroads. Traditional banking institutions have run the gauntlet with the Royal Commission and are now picking up the pieces.
At the same time, new and nimble fintechs are popping up around them, with bright and flashy logos and branding, suddenly becoming attractive to consumers because of what they can offer and their fresh approach.
There has been a wealth of challenger banks breaking into the Australian market over the last two years. Brands like Xinja, 86 400, and Up Bank, are all gaining traction with consumers.
So, what exactly is it that they’re offering that consumers can’t get enough of?
It all comes back to the way these businesses are set up. These fintechs focus on technology-led banking, not banking-led technology.
They only operate digitally. They push hard on the things that ‘matter to millennials’, like no fees on overseas purchases. They offer complete transparency on which vendors you have paid through an auto-detect, allowing for more effective budgeting.
Perhaps more importantly, they can talk to consumers in plain, jargon-free language. They seem to make the banking process simple and offer value above and beyond what consumers perceive to come from the incumbent banking giants.
What do we want?
According to a KPMG report, by 2030, millennials will comprise 75% of the workforce. The report also states that 70% of consumers are looking to consolidate their financial relationships, to have them all, or most of them, with one provider.
A changing workforce coupled with a change in how consumers want to organise their lives means that financial institutions need to start working on how they can meet the needs of this shifting demographic.
To say that it is the end for the traditional banking institutions would be naïve. They are far from out of the game. They still have appeal with consumers, and still resonate well with certain demographics. But as technology continues to evolve, they need to keep pace with the fintechs.
So how can they do this?
- Don’t make assumptions about your audience
Assuming that people under 40 live off avocados, and that people in their 50s like sudoku puzzles and long walks on the beach, might be a little off. Making incorrect sweeping assumptions about your audience may alienate them, so try to keep stereotypes to a minimum when you’re talking about your customer base, or potential customer base.
- Embrace social media to communicate
Most businesses and brands are active on social channels, but there’s still some reluctance to actually engage with people through it. We all know that engaging with customers on Facebook as a platform can very quickly turn into a mud-slinging contest, but for consumers, knowing that they have a way to reach the brand is half the battle. How they are communicated with on their issues is the sticking point.
- Value your customers
Ultimately, consumers want to feel valued by their bank. We don’t want to feel like we’re being ripped off, like we’re being taken advantage of by our bank because we’re being loyal and sticking around. Offer us competitive products, help us save money, and make us feel like we’ll be missing out if we move on to another institution.
At the end of the day, it’s not just how you reach out to your customers, but how you keep them.
Traditional financial institutions won’t stop the fintechs growing or sweeping up unhappy consumers. Instead they can look to how they interact with and treat their existing customers. As much as we love technology and things being made easy for us, we also like trusted and historical brands – there may well be room for both.