When you think of fintechs, you probably think about scrappy upstarts delivering elegant web and mobile apps from a hipster office in Hoxton.
When you think of insurgent banks; you might think of small banks that offer new services that their bigger rivals are unable or too complacent to offer.
The story isn’t that simple. Behind these success stories is the technology these businesses use to make it happen.
Fintechs and insurgent banks aren’t conjuring innovation from thin air. They’re achieving success because they embrace the technology that allows them to understand their customers’ needs and keeps them agile enough those needs with rapidly-evolving products.
Here’s how they do it:
1. Modern IT infrastructure
Traditional banks find it so difficult to keep up with their new competitors because their core IT systems are old, complex and slowing them down.
The Financial Times summarises the issue:
“The cost of maintaining these often ageing and unwieldy systems eats up three-quarters of banks’ IT spending, according to Celent. That leaves only a quarter to spend on innovations to keep up with the rapidly emerging threat from the many technology groups and start-ups trying to steal market share in areas such as payments.
Insurgent banks and Fintechs have up-to-date infrastructure and the knock-on effect is a huge competitive advantage over their established competitors.
Banks are forced to fund costly projects to create IT solutions that will integrate with their ageing infrastructure. Meanwhile, the financial insurgents can invest in whatever technology they need to drive growth, safe in the knowledge it will integrate seamlessly with their existing IT systems.
2. Better customer insight
The challengers to the traditional banks know that to steal any business from their established competitors, they have to know their customers better.
To gain the upper hand, fintechs and insurgent banks are using data analytics tools to collect data from research and surveys, social media, and their existing customers using online and mobile applications.
They don‘t let this data go to waste. By embracing CRM systems, upstarts are collating this information into insights they can use to personalise their offers.
75% of financial services leaders think the most important impact fintech will have is increased focus on the customer, according to PWC’s Global fintech report.
‘We thought we knew our customers, but fintechs really know our customers,’ says a senior banking executive according to the same report.
3. Born in the cloud
Financial services insurgents are using the cloud to make the most of their customer insight. Cloud tools offer big advantages to start-up businesses:
• The cloud allows businesses to create and deploy applications quicker, and allows financial challengers to capitalise on holes in the established market.
• Traditional businesses have to invest in bigger data centres as they grow. Cloud-powered businesses can scale up and down as and when they need to meet customer demand.
• Smaller upstarts can’t afford to fund the security and maintenance of big data centres. Reputable cloud providers can provide the same reliability that large financial institutions have invested over decades to achieve.
Founded in 2010, Metro Bank is just one of the insurgent banks making the most of these advantages. The bank targets the holes in the traditional banking customer experience, giving their employees cloud CRM tools to personalise and improve that experience. The result; nearly 100% year-on-year growth.
As a new fintech startup, Axioma have made similar strides in the financial risk management sector. ‘Until recently, the only way to enter this market was via the long road of credibility-building,’ Microsoft points out. By using the cloud, Axioma has fast-tracked that process and has created a modern risk management platform that is competing for business with the established names in the industry.
Many established financial businesses are now turning to the cloud to level the playing field. See for yourself how some of our previous finance clients have taken advantage of the cloud in our case studies.
Investment fuels innovation
Fintechs and insurgent banks are a telling example of how innovation depends on technology.
Jamie Dillon, CEO of JPMorgan Chase, downplays the impact of financial insurgents in a recent interview with Bloomberg:
“For example, they [a Fintech] might lend to one of our customers who’s got a $200,000 JPMorgan Chase loan, and this person wants to get another $20,000 for a new truck or a piece of equipment. And what does he do? He goes with them [the Fintech], because he gets it in 15 minutes. If he goes back to the bank, he may have to go through this whole big long process for that $20,000.
‘Can we do something like that? Of course we can,’ says Dillon. But, right now it’s the challengers that are taking these complex processes and making them simpler for their customers. Whether the big banks are capable of following suit is irrelevant.