Battle Cards Out: It's Fintech vs. FIs

Date:   Wednesday , August 31, 2016

Headquartered in Washington, Newgen Software is a global leader in offering Business Process Management (BPM), Enterprise Content Management (ECM), Customer Communication Management (CCM) and Case Management solutions to leading banks, BPOs, insurance firms and healthcare institutions.

Recently, one of my colleague, while transferring money to his wife\'s account, encountered an issue with his banks\'s online site and the payment failed. Didn\'t matter. He quickly launched his mobile wallet application (which as per him, he always keeps it loaded for emergency situations like this) and zapped the money to his wife\'s account. Anything strikes? Yes! The battle is on between our banking and FI giants and the fledglings in the Fintech community. Who would have thought a decade or so back? Being a Software Products enthusiast, it doesnt come as a surprise to me. However, what does surprise me is the pace at which the fintech startups community is aggressively eating into the market share of the incumbent banks and financial institutions.

Why Are Banks Stuck In The Downcard Syndrome?

Banks have always been seen as a dependable institution when it comes to handling public and corporate finances. However, it took one mortgage bubble burst to jolt everyone into reality that something might be amiss, somewhere. Banks were a pioneer upto some point of time when it comes to technology adoption. Computerization of bank branches and automation of banking processes with niche packaged apps became the norm. Internet banking, ATMs, mobile banking, telebanking, online money transfer through NEFT/RTGS are all pioneering technology that banks have offered to the public. However, with time, banks overlooked certain aspects in technology adoption and fell behind in the race for customer acquisition.

As I narrated above, my dear colleague did not deliberate upon payment failure whether to reattampt the transaction later at the bank\'s website. He simple opted for his mobile wallet that addressed his need for quick transaction. It is the customer experience part that banks are losing out on. The reason?

Customer Loyalty has become a mirage. In this era of instant gratification, customers flock to whoever is offering them the quickest service for their bucks. While banks were busy getting their data strategy right, they somehow missed the transformation in customer expecations. They kept investing to keep their core functioning robust with off-the-shelf packaged apps for handling different processes efficiently. However, with time, banks found themselves in a sea of diverse applications with minimal data exchange between them. The RBS saga that led to 600,000 payment delays in 2015 and the IT system meltdown in 2012 which affected 6.5 million customers in UK brought to the fore the underlying pressure build-up in banks due to ageing technology.

Fintechs-More Than Wild Card Entrants

The Reserve Bank of India has recently confirmed that over 24.51 million credit cards and 661.8 million debit cards are in operation. While, the number of transactions on credit cards grew by 27 percent and 48 percent for debit cards for the year ending March 2016, surprisingly, the winner is a new entrant - Mobile Wallet, which witnessed a 100 percent growth in number of users, and a 500 percent growth in value of transactions.

While banks are to trust and stability, fintechs are to agility and innovation. One of the reasons why Fintechs could make a dent in the banking turf is that they deciphered the pulse of customer expectations and struck while the iron was red hot.

Fintechs are lithe. They are not burdened with legacy systems. They do not have to worry about converting ageing systems to usher in digital. Having been conceived in the digital era, they could deliver an ace - primarily leveraging new age technologies like social, mobile, analytics and cloud (SMAC power). Anytime, anywhere access to services and great customer experience across online & mobile interfaces are the clinching game changers for fintechs.

Who Will Play The Final Trump Card?

The jury is still out, to whom the court will belong. However, it might be a safe bet to say that banks and fintechs will coexist in the future. Banks, on their part, need to recognize that their siloed systems needs to be connected for a better customer experience. Connected systems that makes information flow seamless across their banking activities is at the core of their need for digital transformation. Mind though, just a digital face will not be enough. Banks need to look at technological platforms that can help them connect their siloed processes, bring in digital in their core functioning, automate processes, makes information available to the right stakeholder for timely decisions, and at the same time, leverage their existing investments.

Fintech players, on the other hand need to create and build the trust and dependability sentiment that customers have for banks. Banks have an upper hand when it comes to industry experience and compliance to government regulations. Even though the fintech players are venturing into core banking turf - lending and payments (payment bank license given to fintechs), they need to collaborate with incumbent banks and spruce up their technology to scale their business.