The latest Mobile World Congress (MWC) event recently closed in Barcelona. MWC is the biggest annual gathering of the mobile phone industry and has traditionally been a showcase for the future of phone handsets and product launches, but in recent years it has started focusing on the businesses that are enabled by mobile technologies.
Banking and financial services is one industry that is currently being transformed by the business culture of the app store. Startups are able to identify very specific financial services, such as loans or international money transfers, and offer a service that is cheaper and easier to use than that offered by traditional retail banks.
While banks still have the advantage of their brand and millions of existing customers, some of the new services are making an impact. In particular, these financial technologies (fintechs) are showing just how far behind customer expectations the banks really are.
Customers are already used to Uber getting them a car in 2 minutes, TripAdvisor tells them where the nearest Indian restaurant is located with walking direction, and where they can find a cheap place to stay tonight. Mobile apps offer all this flexibility in other areas, yet in banking even the apps are mostly just offering a mobile version of the service available in a branch, or at the ATM.
But MWC showed that there may be a new way. The fintechs don’t need to fight the traditional banks. There could be the potential for banks to instantly improve their service offering by partnering up with more innovative young startups. PayPal has signed 11 partnership deals recently. Visa is creating an innovation centre in London where they will test out ideas with startups. Citi and Caixabank both featured during MWC innovation sessions stating openly that they are looking for partnerships.
Retail banking is not the only area that is changing. Financial advisors are being threatened by robo-advisors. Corporate treasury departments are seeing their own competition from startups, but all these areas were also featured at MWC with the big players stating that they are seeking partners.
Fintechs may be small, agile, and innovative, but they need to acquire customers quickly so they can scale. Often the lack of a trusted brand can prevent a good idea from growing – especially when services involve finance. It makes sense for traditional banks to seek out the best fintech ideas and to then introduce these services to their existing customers.
Banking analysts have often predicted a looming disaster for banks as the customer-centric fintechs pick off one service after another and reduce bank revenues, but the real picture is more complex. Fintechs need customers fast and banks have millions of customers. The real future for banking may be in creating a better customer experience through partnership with innovative services. What do you think? Leave a comment below, or get in touch on LinkedIn, and let me know.