Thriving During the Fintech Revolution: 4 Power Moves for Traditional Banks and Credit Unions

Written by Antoine Hemon-Laurens, Product Marketing Manager at GMC Software, this article was published in ATM Marketplace, POS Retail Insights and CB Insight. 

Every day fintech market entrants are bringing new competition to the financial industry's traditional banking and credit union organizations. What differentiates them from traditional banks and CUs is their agility in addressing specific pain points such as payments, loans, mortgages, personal finance and remittances at speeds and pricing that are difficult for traditional organizations to match.

The most savvy traditional banks and credit unions see opportunities resulting from these new market entrants and are already embracing the trend with in-house startups or mobile-first banking apps. However, most are hesitating — or having difficulty — crossing the new technology adoption chasm.

One major reason why  traditional banks and CUs are challenged by fintech is their large, departmentalized organizational structure, which inhibits a quick response to customers and market changes.

For example, a mortgage application may take several weeks to be processed by all the relevant stakeholders in a traditional banking organization, including the mortgage, legal, risk and compliance departments.

By contrast, startups like Rocket Mortgage allow customers to move from application to approval within minutes.

The other major hurdle has to do with technology. Traditional banks and CUs have a large number of legacy systems in place and busy IT teams. IT spends a lot of time on maintenance of business-critical systems whose technologies are no longer supported.

Banks and CUs can do four things to overcome these hurdles and fight the fintech battle:

1. Leverage historical strengths to manage customer 'moments of truth'

Traditional banks and CUs have a long history with customers and, despite the financial crisis, they remain the primary institution managing savings. Customers may like online access for convenience, but approximately 80 percent still prefer to engage with a "flesh and bones" bank representative at the moment of truth for an important purchase decision.

Providing best-in-class customer experience at these moments of truth can be a huge differentiator.

2. Create small, dedicated and self-contained teams charged with digital transformation

Traditional banks and CUs, with the organizational and technological barriers they face, cannot hope to move as a whole company with the speed and agility of fintech.

However, large banking organizations can drive successful digital transformation projects with small teams shielded from the rest of the organization and charged with the sole objective of making change happen. 

Millennials and other digitally minded consumers are forcing banks to rethink the way they do business. Bank Customer Experience Summit will explore these trends and how innovative financial institutions are responding to the challenge. Learn more. 

3. Let mobile lead the way

According to a 2015 Bank of America Trends in Consumer Mobility report, 51 percent of respondents said they use mobile or online as their primary method of banking and 57 percent have tried mobile banking apps.

Banks and CUs need to think about what kind of mobile solutions they want to use, depending on their goals. While native mobile applications are very effective for maintaining strong lines of communication with existing customers, responsive Web applications are a better choice for prospects. There are fewer barriers for adoption when browsing mobile websites as prospects consume content in an instant with no download or registration.

4. Adopt cloud solutions for agility

Cloud solutions are growing fast in a financial industry that has long resisted change.

Often driven by the lines of business or marketing departments, forward thinking financial institutions understand the advantages cloud-based approaches can bring.

They see cloud-based solutions as a way to:

  • benefit from business capabilities in an instant, not months;
  • scale business operations at a moment's notice;
  • relieve their IT team from maintaining yet another system; and
  • benefit from other solutions available in the same ecosystem

Resistance from compliance, legal and risk departments concerned about data ownership is a big topic. Nonetheless, there is a growing trend in the willingness of banks and credit unions to adopt hybrid cloud-based solutions to design customer interfaces, business rules or documents while keeping sensitive customer data on their own servers.

Leadership from the top is essential for success

Successful banks and credit unions have board members setting a clear vision, transparently explaining the reasons for their choices and motivations. They can make the case for how their enterprise should respond to the fintech market evolution.

They must leverage strengths and manage their risks while embracing a whole new technological revolution about to hit the banking industry harder than any before.

Antoine Hemon-Laurens is banking customer communications management expert at GMC Software Technology. His focus is on helping banks better engage with their customers through mobile solutions, customer engagement and digital signatures.