Banks and credit unions are increasingly embracing niche strategies to find new sources of growth. Keys to successful niche banking include finding an appropriate narrowly defined but high-value market segment, identifying a unique set of products/services to support the needs of that niche, bringing in the right talent to lead the initiative, and identifying the new technologies (including core systems) needed to support the strategy.
Financial institutions need to be able to engage with customers experientially by using data effectively to promote financial wellness at the individual customer level. Digital technologies enable this type of experience to be applied consistently across the entire customer base. Moving beyond traditional metrics and survey results, companies need to ask how well customers’ needs are being addressed by personalized communications and recommendations.
It can be challenging to keep up with fintechs as they continue to develop new products and services. A review of fintech apps yielded suggestions for improving bank mobile apps. These include early wage access, temporary advances and liberal overdraft policies, supporting new ways of building credit history, helping customers create and stick to budgets, partnering with merchants to provide customers additional places to make cash deposits into their accounts, and creating a services marketplace within the app to help gig workers find business opportunities.
The CFPB has announced that it may start conducting exams of fintechs. In a move traditional bankers will likely applaud, the agency indicated that they will begin using their authority under the Dodd-Frank Act to examine nonbank financial companies that are seen as potentially posing risks to consumers. As the article notes, this could help spur additional BaaS partnerships between fintechs and bank partners who have experience operating in a regulated environment. This CFPB move is an example of ‘functional regulation’ – in other words, if it looks like a duck and quacks like a duck maybe it is a duck. . .
Gen Z customers are getting started on their wealth-building journeys. Many are self-reliant when managing their personal finances, although social influencers are a major source of financial advice. Strategies for attracting these young customers include demonstrating an understanding of their unique needs, building credibility for your institution through influencer partnerships, and building retention strategies around understanding and focusing on the things they care about.
Is it time to start taking the metaverse seriously? Some of the big banks are starting to explore its potential use, but no significant applications have emerged yet since the technology is in its infancy. It does have the potential to offer financial institutions opportunities in areas such as identity verification, payment systems, new product opportunities, employee training, and the ability to reach new markets.
