Friday, March 03, 2017

What is driving Fintech?

Fintech has taken the banking world by storm. Customers are embracing Fintech services rapidly and wholeheartedly. Digitization and Fintech is impacting all aspects of banking, investments & finance. Fintech's impact will be huge and will fundamentally transform the finance industry.

Today, I had open discussion with a bunch of managers at HPE, a group of really smart folks with advanced degrees from tier-1 colleges, on what is driving the rapid move towards Fintech and here is what came out of this discussion.

Digitalisation is a Mega trend 

Digitalisation is happening everywhere and is going far deeper than the cost-saving potential from innovative IT or even developing new revenue streams. Digitisation is fundamentally changing people behaviour.

Digitisation is being driven by three main forces

1. Customer experience
2. Technology enablement
3. Cost Savings

1. Customer experience

Customer experience is really driving Fintech adoption. Customers love the ease of using mobile, web for banking interactions - when compared to walking into a physical bank branches. The ease and the enhanced customer experience of using technology solutions over the good old way of interacting with banks/insurance/finance companies.

Customers are really pushing banks towards  digitalisation. Customers are the leaders in embracing Fintech and are dragging banks into it. Today, customers expect a seamless multi-channel experience - be it from a physical branch or on a mobile app, A consistent service levels that are of global standards.

Customers who got used to the convenience of Fintech are judging banks in how well banks are able to meet their needs. For example, it takes 8 distinct steps to transfer money online when compared to 2 steps in PayTM.

2. Technology enablement

Smart phones and Mobile Internet is rapidly influencing customer behaviour. The ease of connectivity with 4G technology and increased bandwidth has enabled customers to access technology enabled services.

Technology is no longer the realm of large banks and upper class. Customers of all social classes are now very comfortable using mobile, Internet technology and are using it everyday. During the demonitization exercise in India in November 2016, people from all walks of life started to embrace Fintech - right from street vendors, small shop owners, handy men like plumbers etc.

Technology has empowered people and people learnt to harness the power to technology to their benefit.

3. Cost Savings

Unlike technology developments of the past where banks embraced new technology to lower costs, today customers are embracing new technology to save costs for themselves. Customers are unwilling to pay the bank transaction charges for sending money or for loan approvals etc. Customers are using Fintech to reduce their cost of using financial services.  For customers there are two forms of cost savings - time & fees. Fintech provides both benefits, it lowers transactional costs to near zero, and gives instantaneous service which saves time.

Today, Banks are at a disadvantage with their high cost structures and customers are tired of paying banks for basic financial services. Hence it is cost savings to customers that is driving Fintech.

Closing Thoughts 

Fintech can cut costs by up to 90% while rapidly improving turnaround times.  Digitalisation customers to do more with their money and increases the velocity of transactions. This implies that banks need to evolve and rapidly embrace Fintech to make best use of it - allow customers to interact often, provide new innovative services and create better customer experiences. Else customers will move to those banks or new age finance companies that gives them what customers need.


To succeed in the world of digitalisation, Banks must develop a clear strategy that puts customers first - ahead of every single internal processes and costs. This may require redsigning current processes - while looking holistically at end-to-end customer experience, and must go beyond basic regulatory requirements.

The goal must nothing short of "total customer delight", and must traverse across channels for the customer - as a continuous engagement with customers across partners in financial services.

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