The coronavirus pandemic has brought the need for greater and more advanced use of technology within the financial services sector into sharp focus.
During lockdown, and in the ‘new normal’, both customers and service providers have had to adapt to the fact that our physical world is increasingly being replaced by a digital one. This poses significant challenges for many banks and finance companies.
Firms are having to understand quickly how they can deliver an exceptional service at a time when neither employees nor consumers are heading into offices or bank branches. Instead, mobile and online banking platforms have become increasingly important over the past six months.
A recent survey ‘Consumer demand for fintech’ of more than 2,000 UK adults commissioned by Yobota underlined this point. It found that 66% of people were regularly using financial technology between March and July 2020 – representing an increase of more than 50% compared with 2019’s usage figures.
Customers’ greater reliance on this technology has exposed which financial services providers are lagging behind when it comes to fintech adoption. The pandemic has also demonstrated that the so-called ‘fintech revolution’ is still in its infancy, despite how much has been written and said about it over the past decade.
The fintech revolution promised open access to data, hassle-free banking experiences and fairer deals for customers. Yet only relatively small steps have been taken towards this vision. Until now, we have witnessed only a cautious adoption of financial technology as consumers, regulators and established banks became familiar with what it can enable. Covid-19 has exposed the drawbacks of this approach.
In fact, Yobota’s survey showed that 15% of UK consumers have been frustrated by their banks’ poor technology in the midst of the pandemic, with this figure rising to 28% among those aged between 18 and 34.
So, what has been holding back the fintech revolution?
One of the main issues is that fintechs – the start-ups developing these new technologies – are typically focused on solving very specific, niche, single problems: identity verification, alternative credit scoring, AI-assisted chatbots and recommendation algorithms, next generation core banking, transaction classification, and simplification of mortgage chains.
In itself this is not a problem; that is a standard model for tech start-ups in almost every sector. The issue is the way that banks have been adopting and hosting technologies.
On a positive note, things are changing. The pandemic has forced the hands of many companies regarding their use of technology and, in doing so, it has reignited the fintech revolution.
Most business leaders in the sector now acknowledge that technology is not just a competitive advantage for financial services firms, it is essential to their very existence.
The challenge in the months ahead is that many finance companies still have data, systems and processes that are completely reliant on legacy technologies and on-premise servers. As long as this is the case, customers will suffer – making regular trips to bank branches, being held in lengthy telephone queues, and having disjointed conversations with chatbots will remain all too common.
For fintech to be successful, two things are essential: interoperability and cloud computing.
Today, people must be able to access critical financial services digitally. From securing a new product through to managing their finances and receiving advice, this must all be possible from their own home. But more than that, the process of doing so must be as fast, painless and personalised as possible.
There are credit marketplaces in the UK already offering pre-approved loans that can be opened in just a few minutes with minimal clicks. This is possible because the lenders have made progressive choices in the way they develop or utilise technology.
As we look at what the ‘new normal’ has to offer, we can expect more banks to embrace an increasingly holistic view of technology – interoperable technologies on cloud-based banking platforms. Entire actions and transactions will take place without the need for human involvement or cumbersome offline processes.
The fintech revolution is gathering speed and it will lead us to a more open, connected form of banking where people can see and manage all their finances digitally, as well as accessing personalised advice and products from the comfort of their sofa.
In this primarily digital landscape, financial services firms which cannot deliver an exceptional level of service to customers – be it consumers or businesses – risk losing them to those who can. Now is the time for the sector to embrace fintech to its fullest and build systems that are not just adapted to the new normal, but actually help to shape it.
Ammar Akhtar is the Co-Founder and CEO of Yobota, a London-based technology company launched in 2016. Yobota has built a fast, flexible, cloud-native core banking platform, which enables clients to create and run innovative financial products.