Are Fintech Davids Destined to Bring Down the Financial Industry Goliaths with Automation?

By Michael Judd

David vs Goliath

Highly regulated. Steeped in long-standing assumptions. Massive amounts of money and profit could be destroyed if the wrong move towards innovation is made. That about sums up the financial industry with some of the most titanic and established firms in banking, finance, and wealth management that date back over 100 years. 

Disintermediation through the separation of those that have and those that need capital has been key to their past success. The convenience of credit cards has come in the form of a hidden fee of one to three percent. For the most part, the only businesses that still pass that discount to the consumer are select gas stations. Most businesses have absorbed it into their prices. But the status quo is facing seismic shifts that are cracking the crust that has locked the industry in place for decades. And It’s all driven by responding to the shifting expectations of the customer to deliver an experience leveraging technology, and data.

Two of the most significant shifts in centuries are on full display in the financial industry. In the last five years, cryptocurrencies, and the proliferation of data are leading to incredibly popular new customer-centric financial services that have burst into the mainstream, challenging long-held behaviors around money, personal, and business finance. For instance, in less than twenty-five years, consumers went from skepticism of online banking and financial transactions to the vast majority preferring online financial transactions. A recent Banking Journal survey showed that 70% of Americans use online banking, with 40% of those using mobile more than any other method1

This widespread adoption is creating a torrent of data. Just as the data collected in the shift to online shopping has created unprecedented levels of new wealth, we expect the same from the online shift in the financial industry that is helping us understand customer behavior, expectations, and desires. It is a shift that is self-perpetuating as more consumers increase their use of innovative services delivered online and through mobile applications. Now that consumers are no longer wary of connecting to their banks, investments, and payment methods through strictly digital means, they expect access anywhere, any time. This rise of digital finance is being fueled by a transcendent trend of delivering a transformative customer experience. The race is on for every company in the financial industry to differentiate itself by delivering the most powerful and relevant experience it can to each and every customer in the most efficient manner possible.

The rise of financial technology (fintech) is a clear manifestation of the opportunity available. Fintech companies are reshaping the way consumers engage in financial services by making it possible to safely and securely access all forms of financial services at any time. And now that customers access their sensitive financial services as easily as they do everything else on Amazon, Google, Apple, Facebook, and Uber to name a few, they expect the same level of sophisticated customer experience for their financial lives as they do on those consumer platforms. If companies and financial institutions don’t deliver the expected experience at the right price, today’s customers are far more likely to switch, and consumers are switching with far greater frequency than ever.

Successes in the last five years from innovative companies like SoFi, CoinBase, Robinhood, Affirm, Gravity, Acorn, and more are changing the concepts of money, finance, and transactions. Investments, loans, credit, payment processing, and banking are practically commoditized. Switching from one financial service provider to another is virtually seamless, and as such, institutions can no longer count on customer loyalty. This has instigated a fierce battle for consumer wallets throughout the financial industry.

Providing a highly relevant customer experience remains the most powerful means to retain customers. In order to build a differentiating customer experience, financial services companies should start with understanding their customer needs. The market demands it today. 76% of customers expect companies to understand their needs and expectations. Companies can deliver this by leveraging automation and big data to map and deliver a better customer experience. We call this Experience Automation.

The stakes for the financial services industry couldn’t be bigger, and firms are beginning to move fast. CB Insights reports that fintech startups raised $22.8B globally in the first quarter of 20213. The fight is on, and established financial firms must defend themselves against emerging fintech Davids. The battleground is the intelligent automation of customer experience, and the fight is already underway. 

 

About Originate 

Since 2007, Originate is a premier digital innovation company comprised of seasoned entrepreneurs and top software engineers. From startups to the world’s largest enterprises, Originate accelerates businesses with a value-driven approach to business automation.