Not unlike other service industries, traditional banking finds itself grappling with a new world order in which clients expect that money — like everything else in their lives — be available at their fingertips. With the growing popularity of person-to-person money transfers, payment apps and digital wallets, traditional banks’ survival demands nothing short of a revolution in how they interact with their increasingly tech-savvy clientele.
Fear not: Far from dooming traditional institutions, the flourishing of mobile solutions for fintech will simply push brick-and-mortar banks to expand their presence by offering clients tailored solutions across retail, web and mobile. To thrive in the age of fintech, banks will also need to compete with emerging non-bank players offering innovative money transfer solutions, such as Paytm and PhonePe in India, China’s Alipay and the U.K.’s TransferWise.
Here are three core principles to guide traditional banks as they navigate the fintech revolution:
Continuous innovation
A commitment to innovation is crucial to any bank hoping to attract, nurture and retain clients.
Consider the current state of play. Last year, there were 6.5 million average monthly active users of finance apps in the U.S. alone — representing a 40% year-over-year increase compared to 2016. Research by the Collinson Group found that 81% of affluent middle-class customers in key global markets use banking and finance apps, with customers preferring online or mobile banking by a 53% to 47% margin over going to a brick-and-mortar branch or making a phone call.
These statistics underscore customers’ preference for using mobile phones to manage all areas of their lives, making banking more convenient and cost-efficient. Apps make it easier for consumers who demand everything at their fingertips to pay bills, transfer money, manage checking accounts and even invest money via apps.
As technology evolves, more services will become available at the tap of an app, while the market for those services will grow. With millennials set to inherit $30 trillion in wealth from their parents and grandparents over the coming decades, and with millions of the formerly “unbanked” in emerging markets leading the fintech revolution, innovation is a matter of necessity.
Innovative institutions will not only position themselves for success as digital natives and emerging market consumers accrue wealth. They will also be able to easily reach the global marketplace and provide a competitive advantage over less-innovative institutions.
