The road ahead: 5 areas for FIs to focus on

By Octavio Marquez, SVP and managing director, Americas, Diebold Nixdorf

As the adoption of technology has skyrocketed over the last decade, fintechs have been stealing the spotlight. A shift in consumer behavior has left traditional FIs playing catch-up, while taking cues and drawing inspiration from neobanks — e.g., firms that typically offer digital or mobile-only financial services.

Fintechs have a reputation for superior customer service, user experience, transparency and communication — all high-priority qualities that consumers are looking for. 

Yet, while fintechs have introduced new innovations to a staid industry, traditional FIs possess great assets that could allow them to surpass the success of fintechs. Here are five key areas FIs should focus on.

Invest in a stellar UX 

Where fintechs have excelled in meeting customer expectations seamlessly across multiple touchpoints, traditional banking has remained stagnant. With enhanced customer data, quality technology partners and new self-service tools, that's no longer an excuse. Accessing cash should be as easy as sending an order for $60 to a nearby ATM and picking it up when it's convenient. Depositing a check should be as easy as scanning a QR code. Critically, though, banks must ensure new capabilities are intuitive, with instructions and signage that are easy to read.

FIs must also consider their user experience design on both mobile and desktop. Now more than ever, consumers are willing to switch banks simply based on UX — meaning it's directly impacting revenue. Any spend on UX technology is an investment.

Keep it personal 

Customers want to feel valued and understood. If banks want to show that they care, they must take the time to see each customer individually, whether that's through AI, data collection or meaningful relationship building.

That effort can empower FIs to recommend specific, personalized tools and options. For example, if a customer has a student loan, offer refinancing options. Even simple tactics like using first names and relatable messaging can give the impression that the consumer is in control of their own journey. Neobanks have excelled at winning over customers by using language that engages their audience.

Find a voice in the digital world

Digital payments worldwide are expected to reach 726 billion transactions by 2020. Traditional institutions must find their voice in this new ecosystem.

Fortunately, the act of making a purchase, whether it's at the counter or online, sits right at the intersection of the bank, the merchant and the customer, where there is unlocked potential to integrate more of an FI's own touchpoints with consumers' purchasing behavior.

FIs should start looking for opportunities to loan their products and services to retailers, to introduce recognizable touchpoints along a consumer's shopping journey. Open banking APIs, big data and AI are changing the payments marketplace—and savvy FIs will use strategic alliances to gain new footholds.

Seek out regulatory partners 

Why not use regulation as a constant "nag" for innovation? Instead of reacting to each new regulation with the minimum level of compliance, banks should proactively seek out partners that can help them create end-to-end technology solutions to address their risks and compliance challenges.

Regulation technology can be employed to automate workflows, produce reports and drive analyses while reducing human error and overhead. While banks struggle with the creaking foundation of traditional systems, APIs allow seamless integration and efficient implementation into existing systems. Investing in regtech represents one of the biggest opportunities for FIs to catch up with fintechs and to future-proof their organization.

Stay up to date on security

In 2012, when fingerprint unlocking capabilities were first introduced, consumers were skeptical. But since Apple integrated Touch ID on the iPhone, the tradition PIN has become nearly obsolete.

Banks and financial institutions can take advantage of these capabilities by making their apps more accessible and differentiated through biometric access. With the API ecosystem growing rapidly, more financial institutions will take advantage of these solutions.

Fintechs may be leading the way for innovation in the new banking industry, but traditional FIs possess unmatched capital and credibility. Through collaboration and synergy, combined with advanced solutions offerings, traditional FIs and fintechs can collectively evolve the banking ecosystem for the connected commerce era.