Are banks actively looking to partner with fintech companies? Or do traditional financial institutions think that innovation is just for the “latte drinkers of Shoreditch”? These are the questions that Partner and Head of Challenger Banks at KPMG, Warren Mead, posed at the Retail Banking Innovation Conference this year.
Customers don’t care about banking; they care about simplicity and efficiency, which was the unequivocal message presented by Mead. However, as fintech companies and challenger banks are making customer service their number one priority, do banks feel threatened by the newer financial players? KPMG research found that only 27% of banking executives felt threatened by technology, while 50% saw global economic growth as an issue for their company and 49% believed that FX volatility rate was a problem.
Mead expressed that people are using technology in a different way to before. “People are moving from search led online processes to a discovery process when making a purchase.” He went on describe how only some banks understand this and are currently building frictionless capabilities to adapt to this change in consumer usage. Traditionally, banks have been focused on cash flow, but now SME banking has emerged, those institutions are asking how they can grow and fintechs are capitalising on this idea.
“When it comes to international money transfer, banks are dead in the water. Companies like Transferwise can offer the same service for 80% cheaper,” Mead said and implied that in some industries, banks have no future unless they partner with the newcomers. Alongside this, Mead predicts that in 15 years, with the introduction of biometric technology and geolocation into the financial sector, everything will be monitored.
As recent reports suggest, driverless cars may mean that banks will have to serve customers that are inanimate objects or financial institutions will use Amazon drones to determine a customer’s credit risk, Mead said. “Pockets won’t be needed either as it will all be in a microchip under our skin.”
CEO of Matchi, David Milligan, described how although innovation is difficult to implement within a large company, banks should recognise that there is tremendous opportunity. “People are looking at what they can do in other parts of their life and comparing to their banking services. There is a wide gap, “ Milligan said. Collaboration with fintechs is key, because tech is evolving at such a rapid rate that banks cannot keep up, Milligan explored.
Milligan also mentioned how the ABC of fintech is more prevalent now than ever. Regulation is authorising Automation, people have trust in the big Brands now and Customers prefer scale - and fintech companies are understanding this. Milligan revealed that the secret to success for banks is to partner with, acquire and build upon their technologies, but the real challenge is having the ability to run the real proof of concept ideas effectively.