Branches may evolve into ‘experience stores’ where staff members more holistically help customers with their financial lives. In this model, the branch becomes an environment in which financial products are displayed and explained by employees who can provide sophisticated, personalized advice aided by technology. The goal is to offer customers “an experience that they’ll come back for.”
One out of three neobanks being formed now already have an incumbent bank or a larger financial services organization as their parent. These new-age neobanks are being referred to as “speedboats.” The idea is that traditional banks face multiple legacy factors keeping them from serving businesses or consumers with fresh ideas, including their sheer size in the case of the largest banking players. However, a newly created speedboat built to serve a specific market niche can enjoy a level of agility that a legacy bank would not have achieved had it approached that niche in traditional ways.
More than half of executives say that there is a growing divide between where their company is today and where they need to be to remain competitive. Despite the current economic uncertainties and growing pressures for cost-cutting, now is not the time to be pulling back from digital transformation initiatives. Instead, a proactive approach is needed to improve organizational agility, enhance data availability and use, upgrade technology, automate back-office processes, and invest in enhancing employee skills.
Fintech partnerships need to be driven by strategy and be focused on supporting clearly defined goals. Creating successful partnerships requires close collaboration, realistic expectations, compatible technology, and buy-in from internal users. They should also help drive bottom-line results in order to justify the bank’s time and effort.
As privacy advocates applaud the demise of cookies, bank marketers will be forced to rely much more heavily on first-party data gleaned from their own customer base. That’s not necessarily bad news though – first-party data is cheaper and more accurate. And the growing use of open banking applications increases the flow of useful customer data from other sources.
Consistency in terminology is important as banks and fintechs form partnerships. The Alloy Labs Alliance has been working on creating standard definitions of terms like ‘Bank-as-a-Service’, ‘Embedded Banking’, and ‘Embedded Finance’. The lack of a shared understanding of these key concepts among partnering companies can lead to frustrations or even potential regulatory consequences when banks and fintechs discover they have been using the same terms to describe different things. The documents the Alloy Labs partners are creating are intended to evolve over time and serve as a resource in a variety of contexts including contract negotiations.
Bain & Company foresees that up to half of revenue growth for banks will be derived from M&A in the coming years. Key drivers continue to be the pursuit of scale to be more competitive. Low financing costs have also been a factor, and well-resourced fintechs are stepping up their efforts to buy their way further into banking.
