5 Reasons Why the Bank-Fintech Combination is a Win-Win for All
Tune in April 7 and find out how to provide stellar customer care with social media in our free webinar. Register Now »
Banks are changing and so is the way people bank as well. It all is driven by non-banking factors that brought in the changes so gradually that they feel like the obvious next step. These changes are global, they are here to stay, and they are all technology-backed.
In the last few years, we have seen queues dwindle, plastic replace paper, and security take a different meaning altogether. Where technology led, the industry followed. Simultaneously, banks are seeing a lot of shift from desktop to mobile. The customer demand is for an extended value proposition that is more tailored and personalised. This shift, coupled with demands like instant gratification is pushing the industry like never before. So much so that even mere innovation may not be enough; the need is to be at the head of the technology race without further delay. The core question here is no longer ‘should banks innovate’, but how much banks should diverge from its core business of managing finance to technology innovation. These factors put the industry in a Catch-22 situation. Not to innovate technology will be a death knell and constant and drastic technological innovation may not be sustainable.
The FinTech sector brings a sustainable solution to the table through end-to-end technological support and service in a neutral and agnostic manner. They are able to scale up and down to meet all existing regulatory and customer demands of the present and future independently, and at the same time, integrate smoothly with the existing infrastructure prevalent in the financial sector without making any drastic demands.
There are several factors that make tying up with a FinTech an attractive strategy. The questions to ask are how expensive is it to constantly scaling technology not just in terms of resources but in terms of the effort required, what are the measurable advantages that it can provide, and is it worth the time and effort?
Maintain Business Focus
Technology is not the primary business of any financial company. It is not a question of whether they can but whether they should. To expect it to confirm to the rigors of technological innovation may be counter-productive as this will shift the vision from the actual business. Any shift of focus can prove confusing at best and downright disastrous at worst for financial companies. Creating and managing a highly cost-intensive business unit with its own chain of command, strategy, and workforce requires a lot of investment in terms of time as well as expertise. Any slip in aligning the strategies could cost you to lose your business ground despite having implemented best-in-class technology.
Partnering with an online marketplace implies that you already have a partner who is an enabler for your core business. Technology becomes the purview of the FinTech company and you are free to concentrate on your core activities. You can adapt and innovate steadily at your pace without having to worry about losing out on any advantages.
Technology has its price, both material and managerial. Acquiring and implementing technology is not inexpensive, whether to buy or upgrade. The present rate and scale of change has been unprecedented, and upgrading legacy technology may just prove to be prohibitive in terms of costs. Apart from the cost factor, there are also the complexities of managing such a rapidly evolving infrastructure. All the enhancements, additions, replacements, and vendor contract negotiations make it harder each day for financial institutions to deliver measurable business results from their technology investments.
At the same time, partnering with an online marketplace can help you cut down on such establishment costs without compromising on the quality and range of services you can offer your customers. The biggest plus, however, would be not be only the cost and time savings you would make, but the benefits such an outsourcing would help you achieve.
The visibility that a platform like BankBazaar.com, which sees over 9 million visitors per month on an average, can provide is enormous. To be able to attract such a huge footfall is not impossible; nevertheless, it would not be an easy task for any stand-alone financial company. More importantly, justifying such a cost and time-intensive activity in the presence of low-cost, high-technology options that are readily available would be difficult.
The other aspect is the reach that such a platform can provide. A full-fledged digital platform can break down the barriers of brick-and-mortar establishments and manual paperwork and documentation. This extends the reach of a financial institution to remote and hitherto unreachable towns and cities.
Don’t Reinvent the Wheel Anymore
It is essential to keep in mind that even implementing the best technology in-house will always be a repetition of what has been already achieved before by the FinTech sector. If you are too late to start on your implementation, chances are that by the time your infrastructure is ready, it might already obsolete. So instead of driving the trend, you may very well end up at its tail end.Your competition would never be the FinTech sector, which would always remain enabler. You would still be racing against your traditional competition that has already recognized the benefits of collaborating with FinTech services companies.
The focus of a FinTech company, on the other hand, is to innovate on the basis of the most relevant technology to provide the best experience in the finance space. Tying up with an online marketplace allows you to leverage the power of this innovation without actually recreating the entire infrastructure. Moreover, a strong FinTech company would be riding the trend. So if you partner with the right marketplace, the benefits can far outweigh anything that recreating an entire infrastructure could provide. Having a presence on a neutral ready-to-use platform will provide you unprecedented visibility. Shorter integration cycles and crisp processes can make life simpler for you as well as your potential customers. These are not benefits that anyone can afford to write off.
Increase Customer Outreach
The biggest reason for the proliferation of the online medium is the customer demand from not-so-approachable locations. Financial inclusion and democratization of personal finance is only achievable via the online model. It is always difficult to establish state-of-the-art brick and mortar infrastructure in remote locations, and hence, reaching those customers is always problematic. Online platforms,especially through the medium of smartphones, cater to these particular sections and their banking demand very effectively.
At BankBazaar.com, we have seen a lot of traction from not just tier-2 and tier-3 cities, but also border towns such as Leh and Jaisalmer. This opens an entire new geography for financial institutions to target, expanding their reach significantly.
Cater to Customer Needs
The popularity of the online medium has been driven by the customer demand for more convenient ways of banking. Even if you have a state-of-the-art infrastructure, you would be unable to cash in on another huge trend to compare offers on almost everything before buying. Online platforms cater to this particular demand very effectively. The eCommerce companies encouraged this trend, and now everything including the personal financial product industry is catching on. To shut eyes to this customer pattern and stay away from comparison sites could mean drastically reduced visibility and reach.
Online platforms also provide a solution to another concern of customers and financial institutions – the complex, and often painful, task of documentation and verification. It has the ability to take the entire process paperless and presenceless without compromising on individual security requirements. From the customer perspective, noting can win a financial company more brownie points than this.
Technology is the biggest enabler, and lagging in technology adoption in today’s world is never a good idea. However, the key to successfully utilizing technology lies in not just blind adoption but in a systematic and strategic approach to initiatives that can provide you with optimum reach at a minimum expense and maximum ease.The idea is for finance and FinTech to work together cohesively as one unit drawing on the strengths of each other to provide exceptional services to the consumers. That is the most successful solution on the horizon.