In today’s hyper-connected world, organizations must constantly evolve to satisfy the appetite for customers who expect quick, convenient, and reliable service at their fingertips. The financial services industry is no exception. The rise of innovative fintech companies is a perfect example of how this new reality is reshaping the way we think about the banking business model.

How Has Fintech Changed the Financial Services Industry?

Fintech companies use technology to replace traditional methods of banking, and in some cases even introduce entirely new products and services. For example, there are services available today that use Artificial Intelligence (AI) and Machine Learning to a calculate consumer’s credit report and predict an interest rate without the involvement of a loan officer – saving the consumer time and money while ensuring a low-rate loan. Another example, and perhaps one of the most influential uses of fintech, is the peer-to-peer payment service, Venmo. This solution allows customers to bypass the need to take cash out or write and process a check, eliminating the middleman and increasing the speed of transactions.

What Are the Threats Fintech Poses to Banks?

Fintech companies are more than just a fad; they’re fundamentally changing the way people think about banking. Simply put, customers don’t want to work with a company that doesn’t allow them to buy products and services the same way they buy other goods in today’s society. If traditional banks are slow to provide the ease and convenience that today’s consumers have come to expect from fintechs, then customers will take their business elsewhere.

Does this mean that fintech companies are going to replace the banking industry entirely? Not exactly. But it does mean that savvy challenger banks are poised to set themselves apart from the competition by adopting certain practices of fintech companies.

What We Can Learn from Fintech Companies?

Here are three ways traditional banks can adopt fintech practices to differentiate their brand and stay ahead of the competition in a rapidly changing business environment:

Move Beyond Your Comfort Zone

Most banks have risen from a time when the safest and most reliable way to build competitive advantage was through slow and gradual improvements to their tried-and-trusted methods. Fintech companies have shown us that size is no longer protection from a savvy startup. The speed at which technology is influencing customer preference has created a climate where the opportunities are endless, but the future is much less predictable. Traditional banks need to move beyond their comfort zone and learn how to bring the continual innovation and entrepreneurial methods of fintechs into the corporate world – or risk falling behind!

Take a Customer-Centric Approach

This is one of the biggest differentiators between fintechs and traditional banks. Fintech companies have excelled at taking a customer-first approach to the design and delivery of their products. With the ability to digitalize the majority of banking services today, savvy digital customers now want the ease, convenience, and tailored experiences of online banking. To deliver this, more insights are needed on who the customers are and what they really want. Technologies such as big data and machine-based learning can help gain these insights. Which brings us to the final point…

Leverage Your Data!

Fintech companies are nimble startups that have the speed and agility to lead the charge in innovation where traditional banks still struggle. However, long-standing banks have their fair share of advantages, especially when it comes to their data! Well-established organizations have accumulated tons of data over time. They should be utilizing their sizable data sources to gain a deeper understanding of their customer’s needs. Better yet, develop brand new experiences using AI and machine-based learning to help customers manage their simple needs more efficiently and effectively, while also opening up more time in the day for employees to focus on more complex solutions.

While keeping pace in a rapidly changing business environment can feel like an uphill battle, the good news is that you don’t have to go at it alone. BDO Digital can help you develop a clear, often staged approach to digital transformation to help you meet the demands of modern banking today. Contact us to learn more.