Generation Z accounts for 40 percent of all consumers, while only 47 percent of this generation uses a major bank. In order to stand out, banks must focus on new approaches to drive value for this growing segment. FinTech companies have been successful with Generation Z because they offer easy and efficient solutions. Banks need to make investments in mobile banking and more self-service options to emulate the technology-driven ease offered by FinTech.

According to global management consulting firm McKinsey, by 2025 between 10 and 40 percent of bank profits may be under threat due to the expansion of FinTech companies. Often banks, in order to proactively move ahead, find ways of cooperating with the most promising FinTech companies. Even in traditional banks, the system of interaction with customers is changing, since most of the work is shifting to digital channels. The traditional bank with branch offices, queues and paperwork is becoming outdated.

Some of the largest banks are closing branches that previously served both corporate and retail clients. This makes sense, as most people now use online banking, mobile applications, and call customer service phone lines less and less, preferring to communicate online.

FINTECHS – SUCCESSFUL EXAMPLES

Revolut is the FinTech startup founded in the UK in 2015. The main advantage is the usage of interbank exchange rates, which are typically 2-3% cheaper than standard bank exchange rate. It is also possible to withdraw money abroad for free and get comprehensive travel insurance within a few clicks in the app for only €1 per day.

Ant Financial developed “3-1-0” online lending, that is, a service characterized by a 3-minute application process, and 1-second loan granting and all with zero manual intervention. It has provided loans to over 4 million small and micro enterprises and entrepreneurs over the past five years, helping them tackle capital shortage, allowing them to survive and grow.

BANK’S ADVANTAGES

Although FinTechs are more agile and flexible comparing to traditional financial institutions, banks still have some major advantages – high level of customer trust, expertize, large customer database and huge amounts of data. In order to leverage on this advantages, banks have to use all customer data and react based on real time events. Data-driven banks have to use data analytics and Big Data architecture to make informed decisions and more profitably serve their customers and streamline their operations.

The data that banks can use to enhance their profitability includes company financials, qualitative customer data, behavioral data, transactions and credit utilization history. Establishing a centralized system that captures this unstructured data systematically and consistently is the first step in this process. As banks begin to structure the centralized data, they must ground it in core business principles by identifying which business and operational metrics are critical to the organization. To be a data-driven bank, bankers must align top business goals and priorities with usable and actionable insights.

HOW TO FIGHT FINTECHS

Don’t fight with them, collaborate with them

Huge global banks like Goldman Sachs, JP Morgan, and CitiGroup are now the biggest FinTech investors on the planet. They seek to secure their future through artificial intelligence and machine learning solutions. This is also applicable to smaller banks through collaboration with local FinTechs and companies that are developing solutions for banking industry.

Process automation though AI

By automating processes, there is more time for creative and complex tasks. 46% of large FinTech companies consider artificial intelligence to be one of the most relevant emerging technologies for investment. And there is a good reason behind it. Artificial intelligence and predictive analytics have become crucial in helping companies obtain competitive advantage.

Get to know your customer

Banks need to target customers with personalized offers delivered on preferred channel based on real time events. Customer information needs to be stored centrally and handled from one place. In that way, banks will deliver more personalized services by determining the optimal number of channels (or customer preferred channel) for communication. Customers expect personalized communication, at an optimal time on optimal device. That is the advantage of Opti-channel experience – personalized approach, relevant offers and timely communication. Opti-channel provides such experience by utilizing geolocation, artificial intelligence, and predictive analytics. Processes are automated and human resources are used more efficiently.

Digital platform as customer acquisition tool

Banks need to have digital roadmap strategy in order to completely evolve and transform their digital platforms and solutions. By implementing whole set of digital products, banks can disrupt not just local market but regional markets as well.

New digital platform concept enables both existing and new clients to apply for any financial or non-financial product (etc. cash loan) without visiting branch office. All necessary documents can be uploaded via digital platform. The whole process, ending with money on the client’s account lasts only 30 minutes. In this way, banks are answering customer’s needs by enabling them to finish the whole process online, without visiting the branch.