The coronavirus pandemic has brought into sharp focus the need for greater and more advanced use of technology within the financial services sector.
During the lockdown, and in the current age dubbed the “new normal”, both customers and service providers have had to adapt to the fact that our usual physical world is increasingly being replaced by a digital one. For many banks and finance companies, this poses significant challenges.
Firms are having to quickly understand how they can deliver an exceptional service at a time when neither employees nor consumers are heading into offices or bank branches. Instead, mobile and online banking platforms have become increasingly important over the past six months.
A recent survey of more than 2,000 UK adults commissioned by Yobota underlined this point. It found that 66 percent of people were regularly using financial technology between March and July 2020 – representing an increase of over 50 percent compared to 2019’s usage figures.
Disjointed tech platforms have been exposed
Customers’ greater reliance on this technology has exposed the fact that many financial services providers are lagging behind when it comes to fintech adoption. Perhaps more importantly, the pandemic has also demonstrated that the so-called “fintech revolution” is still in its infancy.
The fintech revolution is a phrase many people will have seen over the past decade. There has certainly been a lot written and said about it.
The revolution promised open access to data, hassle-free banking experiences and fairer deals for customers. Yet only relatively small steps have been taken towards this vision. Until now, we have only really witnessed a cautious adoption of financial technology as consumers, regulators and established banks became familiar with what it can enable. Covid-19 has exposed the drawbacks of this approach.
In fact, Yobota’s survey showed that 15 percent of UK consumers have been frustrated by their banks’ poor technology in the midst of the pandemic, with this figure rising to 28 percent among those aged between 18 and 34.
So, what has been holding back the fintech revolution?
Well, the first issue is that the term itself is perhaps misleading. Fintech will be revolutionary – it will completely alter the way banks operate and people manage their finances. To that end, it has not been over-hyped. It is the timescale that needs reassessing; as with most tech trends, it will take many years for financial technology to reach maturity.
More technically, another challenge has been that fintechs – the startups developing these new technologies – are typically focused on solving very specific, niche, single problems: identity verification, alternative credit scoring, AI assisted chatbots and recommendation algorithms, next generation core banking, transaction classification, and simplification of mortgage chains.
In itself, this is not a problem; that is a standard model for tech startups in almost every sector. The issue is the way that banks have been adopting and hosting technologies.
Embracing cloud-based banking platforms
Positively, things are changing. The coronavirus pandemic has forced the hands of many companies when it comes to their use of technology and, in doing so, it has reignited the fintech revolution.
Most business leaders in the sector now acknowledge that technology is not just a competitive advantage for financial services firms; it is essential to their very existence. After all, as consumers become used to being able to perform important financial tasks within just a few clicks in the comfort of their own home, they will not willingly accept working with a bank that employs more cumbersome and time-consuming processes.
The challenge in the months ahead, then, is that many finance companies still have data, systems and processes that are completely reliant on legacy technologies and on-premise servers. As long as this is the case, customers will suffer – making regular trips to bank branches, being put in lengthy telephone queues, and having disjointed conversations with chatbots will remain all too common.
For fintech to be successful, two things are essential: interoperability and cloud computing.
Today, people must be able to access critical financial services digitally. From securing a new product through to managing their finances and receiving advice, this must all be possible from within one’s own home. But more than that, the process of doing so must be as fast, painless and personalized as possible.
There are credit marketplaces in the UK that already offer pre-approved loans that can be opened in just a few minutes with minimal clicks. This is possible because the lenders have made progressive choices in the way they develop or utilize technology.
Faster adoption likely in the months ahead
As we look at what the “new normal” has to offer, we can expect more banks to embrace a more holistic view of technology; interoperable technologies on cloud-based banking platforms. Entire actions and transactions will take place without the need for human involvement or cumbersome offline processes.
The fintech revolution is gathering speed, and it will lead us to a more open, connected form of banking where one can see and manage all their finances digitally, as well as accessing personalized advice and products all from the comfort of their sofa.
In this primarily digital landscape, financial services firms that cannot deliver an exceptional level of service to customers – be it consumers or businesses – risk losing them to those who can. Now is the time for the sector to embrace fintech to its fullest and build systems that are not just adapted to the new normal, but actually help to shape it.
Hero image courtesy of cafecredit.com
Ammar Akhtar, co-founder and CEO, Yobota