Fintech companies and banks need to grasp that real innovation occurs when they build from scratch, not by adding more software to an archaic system.
FREMONT, CA: Retail banking has only recently undergone major technological innovations from a software point of view in comparison to other industries. It is forced to isolate itself from social media and customer interactions. Since mobile devices are omnipresent, regulations have shifted, and the internet has become faster over the year, innovation in retail banking has been enabled and accelerated over the past year because of Covid-19. Retail banking, one of the last holdouts from the first generation of the internet, is now undergoing a complete revolution that will benefit consumers for many years by bringing long-lasting innovations to the industry.
Digitization challenges in banking
Retail banking isn't going to be transformed by fintech alone, even though fintech has been driving change in the past few years. Since the 2008 recession, banks have concentrated on generating revenue; innovation has taken a back seat. Several banks today are incapable of innovating where it matters most: the customer's experiences and journeys. As a result of most financial products being isolated, bankers cannot clearly understand their customers' needs or how to help them develop better financial habits. Consumers distrust the banking industry because misaligned business strategies focus more on product silos than holistic customer experiences.
Fintechs do not fully capture customers' journeys
Among the essential reasons that finance technology came into being was to make it easier for people to connect with their money and bring transparency to an industry that has traditionally been opaque, that of banking. However, fintech companies were formed out of the need to create solutions for customer pain points to fix the aspects of the bank's product silos. They cannot entirely innovate because these solutions only address the front-end experience and are unable to innovate much deeper. The fintech industry often relies on partnerships with banks to solve problems from the inside to combat these difficulties. These partnerships can add to the already slow-moving, overly siloed banking system despite their benefits to consumers.
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