15 years after the global financial crisis, bank customers are often still unconvinced that their money is safe. Simon Tobelem, CEO of next generation business banking platform Arie Finance, explains how FinTech can help banks rebuild trust with the public.
It’s a question of trust, compounded by nervousness among businesses and individuals in these times of war, pandemic and rampant inflation. One thing is certain for banks and other financial institutions in such fragile conditions: they must be innovative in order, if not to gain new customers, at least to keep those they already have – and there must also be reassurance.
According to the Edelman Confidence Barometer, banks and financial institutions form the industry that people trust the least, whereas Trustpilot reckons fintech start-ups in payments, investment and finances services are the exception. Despite regulation varying from country to country, an encouraging number of FinTechs or neo-banks are relatively well perceived by customers who are increasingly aware of how-to digital tools and applications in finance.
Nonetheless, suspicion is never far away as data privacy and the onward use of information remain a huge concern. This has been a major hurdle for open banking reforms in the UK, with consumers reluctant to share personal data with fintech apps, even for accessing better or more competitive products.
Conventional banks are still 72% of the market for banking services and payments. Neo-banks and fintech start-ups have struggled to make inroads, despite compelling service offerings. In fact, the peak of the pandemic in 2020 saw the larger traditional banks’ deposits increase.
So how is it that even after managing to raise billions of dollars in funding, the vast majority of early stage FinTechs are struggling? In short, many do not seem to be able to provide basic but critical support to their customers, some of whom may feel lost as they navigate a range of new, largely digital, services. Online too often means nobody to phone, but a customer journey cannot end with app registration. The possibility of help at every touchpoint of a transaction, even if it’s not needed, is imperative.
Customer service should therefore be a key pillar in fintech. Clients, quite reasonably, equate digital with fast and easy – including easier access to human help when necessary. Furthermore, service that exceeds expectations creates loyalty and an inclination to refer.
A second area underpinning trust is transparency. Visibility and clarity are critical to delivering a better banking experience: the full cost structure of all products and services; complex areas explained in layman’s terms; providing tools to better manage customers’ financial risks; and better insights to guide clients to the right strategies.
Consistent communication is key for FinTechs to maintain hard-earned trust. They must be authentic in in sharing with their clients the good and the bad news – exciting corporate developments at the provider, as well as announcing improvements resulting from customer feedback.
Communication, occasionally with humility, is evidence of valuing customer relationships. Nowhere is this truer than when dealing with complaints. These need to be handled and solved quickly – when addressed properly, complaints can become opportunities to discover issues, improve service and win customers.
Technology alone cannot grow confidence in financial institutions, but its usage can create a ‘new normal’ standard of greater efficiency and productivity. Confidence, trust – and profitability – will follow when technology drives innovative products or services that provide a seamless customer journey.
Knowing your customer
To be fair, it also has to protect the institution. FinTechs have spent millions on AML/KYC compliance and many are now looking to reduce their costs while running more effective programmes, some combined with AI, which are user friendly for customers and onboard them quickly with low risk of identity fraud.
As for regulators, without neglecting security and data protection they have had no choice but to adopt a new mindset and adapt to new technologies. New financial players in the UK, continental Europe and the US have been treated flexibly by regulators, relative to traditional operators.
For example, regulators such as France’s ACPR and AMF, the UK’s FCA and the FDIC in the US have entered into regular exchanges and even created ‘sandboxes’, where fintech start-ups can register or be exempted from legal obligations so they can test their products or services for a limited period. This clearly helps regulators better manage the specific risks associated with the emergence of new players.
Rather than complaining about unfair new competition, incumbent banks have also decided to change mindset, deciding it’s better to partner with neo-banks and fintech start-ups by integrating their innovative payment activities in ad hoc subsidiaries to become flexible payment service providers.
FinTechs are still pushing at an open door with potential customers, especially millennials. Traditional banks are still mistrusted by comparison; tighter financial regulation across the board has hiked the costs of intermediation for established players; and cloud storage, which helps to harness large scale data flows, possibly fits more easily into fintech models built from scratch.
Perhaps most importantly, these new players have begun to grip the concept of “personalisation” in their offer, rather than the “massification” pursued by banks in recent decades.
Research might show that people don’t trust their banks, but they do trust the overall banking system to keep their money safe. FinTechs and neo-banks can turn a trust deficit among traditional providers into an opportunity to flex technology for sustainable customer benefit and market share growth. Winning experimental credit for a new feature or a new service is easy, but time-limited. Long customer relationships are built on confidence and trust.