How FinTech Affects Banks by Betting on User Experience?

Bill Gates said that banking will always be needed, but banks as we know could easily disappear. And FinTech is all about winning changes and everyday finance improvements.

In 2015 venture capitalists raised $19.1 billion USD to support FinTech revolution. With the five biggest banks controlling nearly $15 trillion in assets, FinTech’s $19.1 billion in venture investments look like peanuts. Anyway FinTech trend is only growing stronger and for the worst it is attacking most profitable sectors of banking.

1. How and why did it happen?

Traditional banks and financial sectors have been playing catch-up for many years. Nothing much has changed over past 20 years. Bank managers are hesitant to embracing changes and new technologies. Some may disagree, saying that banks has come a long way these years, but in reality all improvements that were done was in favour of banks than customers.

Online banking has reduced need for regular bank branch visits. Everything can be done online. This changed how we receive banking services not banking model itself. Online banking, probably, wouldn’t happen if accountants wouldn’t notice that maintenance costs of online banking system is less than branches.

For banks, moving online was strategic and beneficial move. Just because you are on the web doesn’t mean you understand it. On the other hand FinTech is understanding clients better and has right online strategy.

FinTech revolution started during last financial crisis in 2008. Previous finance sector employees, who lost their jobs, wasn’t ready to give up on finance. They teamed up with IT professionals and started creating FinTech startups that were solving people problems instead of banking problems. Due crisis, trust in traditional banks was damaged and everyone was eager to save and manage their money. This was huge opportunity window and new finance oriented services were booming.

2. How FinTech won their customers

FinTech revolution brought us better finance management tools, mobile payments, crowdfunding, fast loans, peer to peer lending. All this was done by brilliant minds that came together and created services where banks struggled. FinTech innovators understand real struggle customers face when they have to interact with bank services.

FinTech startups understands that splitting banking services into separate and mastering at least one of them will grant them recognition and maximum customer satisfaction. This is where banks has failed with their online services. There are so many of them and none of them are perfect. Most of them are overcomplicated and confusing. Some FinTech startups have vision, that traditional banks lacks and this vision is user experience oriented vision.

FinTech startup founders thinks and sees finances through customer eyes. They choose to be all about customer and create products they want to use. Banks, on the other hand, focuses on better loans, fees, branch locations, but uses care for comfort, accessibility and simplicity. This is how crowdfunding and fast loans became so popular. It is easier to start a Kickstarter campaign and receive necessary product funding than go to bank branch and ask for loan.

More and more entrepreneurs are choosing this and banks are losing potential customers just because at right time they didn’t choose to change in favour of customers. They thought — we already have good formulated loan program, why would it need to be changed.

Same happened with fast loans and personal finance management tools. Almost all online banking services has personal finance management tools, but have you found them or even tried to use? Probably no, you didn’t even know they existed and if you even tried you would stop using them because of their complexity. And then there is Mint success story about simply perfect customer experience built personal finance management tool. Mint does only that is needed in simple and beautiful package.

3. What banks and finance industry can do?

For some of us life with banks can be hard, but without them it would be brutal. Banks are not going to bankrupt or disappear, but almost everyone agrees — they need to embrace changes. The majority of established banks already have platforms to deliver new services — challenge is in the exploitation. Ability to shift from product centric thinking into more customer centric and focused set of offerings. It may challenge traditional banking operating models. It will require skills of IT, UX and product teams to deliver finance services that customers will be happy to pay to use.

Today’s digital customers have higher expectations than ever. To be successful, companies need to get to new innovative approaches to attract and retain customers through highly relevant and personalised experiences across multiple channels. Although customers now have the freedom to switch banks more quickly than ever, it’s the job of the banks themselves to unlock added services and ultimately put the customers firmly at the centre of what they do. Having great online services, designed towards users is a positive step towards this goal.

To hit customers expectations successfully, banks should be looking outside of the traditional banking industry. They should hire designers, customer experience professionals, startupers and innovators who have an understanding of customers’ needs and expectations. This strategy mixed with flexible product innovation is providing a formula for success in traditional banking environments which if followed will enable banks to compete with the FinTech disruptors in the market.

Check out my blog about financial and banking UX design >>