When it comes to the fintech industry, there’s been an explosion of new startups coming to the market. These companies are not only trying to address the thornier issues within the sector but are also embracing digital technology and Millennials. And while some of these startups may not be successful, others have the potential to transform the financial sector in the near future.
Millennials are comfortable with digital technology
If you want to be a FinTech innovator, it pays to understand how millennials perceive banking. Recent surveys in the US show that this generation has a very different perspective than their parents. For example, millennials are most comfortable with digital technology. For investment research, they can easily use affordable alternatives to Bloomberg, therefore they are totally independent of the old tools and methods.
They are also less loyal to their current financial institution. In fact, in the last two years, 33% of millennials have changed banks. Their expectations are higher, too. They expect faster service, more personalized digital experiences, and greater transparency. Moreover, millennials are the ones driving all industries to refocus on mobile devices.
According to BI Intelligence, almost 40 percent of millennials do not visit a physical bank branch. In fact, one-fourth of millennials have primary checking accounts with digital-only banks. Despite the convenience, security can be a factor. For example, 41 percent of millennials lost track of their balance.
The survey mentioned above also showed that one-third of millennials would switch to an Apple or Google banking solution if they had the choice. For fintech startups, this could be a golden opportunity.
It turns out, the biggest driver of attrition among young customers is a poor mobile banking experience. However, this does not have to be the case. For example, billing solutions from Fiserv and BillMatrix allow FIs to keep up with the demands of their digital-first customers.
In the financial services industry, the biggest buzzword is mobile. Not only do millennials use mobile banking, but they are more likely to engage in financial services that are embedded into social media apps. They are also more likely to use loyalty-based mobile apps. This indicates that the next big thing in the finance world is digital money management.
Several challenger banks are taking advantage of this to compete with the incumbents. One example is MX, which has partnered with Finn AI and Q2. Using these technologies, they have produced a white paper that explores the use of financial products by Gen Z. They also collaborated with Rival Technologies on a similar study.
Having a well-thought-out plan to keep up with a digital-first customer is a necessity. For example, if you have a web-based banking system, make sure that it is easy to navigate and intuitive.
Banks are uncomfortable with digital technology
The Consumer Finance Protection Bureau (CFPB) is the watchdog of large banks. It recently organized a forum for members to discuss digital technology in banking.
There are three main paths that banks can take to implement the new technology. They are: building their own apps, using third-party solutions, and experimenting with super-apps.
The first is a bit of a no-brainer. There are already a number of banking applications available that are capable of much more than just a bank account. But it’s not always easy to build something in-house. The second path is more ambitious. It includes a rethinking of the way the bank operates. Essentially, it means making changes that are agnostic of where the money comes from.
The best way to approach this is to start with the most important thing. That would be a digital innovation that has the potential to revolutionize the industry. This may be a new customer service solution, a new product, or a new service experience. Digital innovation must be able to meet customers where they are. This could mean at home, on the road, or in an airport.
The most exciting innovation would probably be an app that can predict when and where customers will need their money. This is probably a long-term technological change. But it’s not enough to survive in a competitive market.
The “eco-system” is a popular new way for banks to improve the customer experience. This involves bringing in outside tech partners to enhance your in-house capabilities.
However, most consumers still prefer human interaction. This is where “fake digitization” can come into play. During the coronavirus pandemic in Europe, a number of banks were forced to adopt digital technology. But the floodgates to tech innovation opened for only a short time.
For example, the MIT Centre for Information Systems surveyed thirteen of the largest US enterprises. The resulting study estimated that digital disruption could account for 32 percent of revenue in five years.
The COVID-19 pandemic has exposed flaws in both the customer and internal operations of European banks. It has caused a great deal of damage to both individuals and corporate budgets. The result is an urgent need for bankers to develop a robust digital innovation plan.
Fintech startups are addressing the industry’s thornier problems
Fintech startups are tackling the thornier problems of the financial industry. They’re developing value propositions in unique niches that larger players don’t offer. These startups deliver services faster and more effectively. The best ones are able to create a clear value proposition that sets them apart.
The fintech industry has a vast reach. In addition to providing consumer-centric services, it also touches the back offices of banks, insurers, property management firms, and more.
The fintech industry has been disrupted by technological advancements and increased availability of data. Today, fintech apps and software allow people to track and manage their finances more easily. Some of these apps include Robinhood, which is a mobile-only stock trading app. Others are robot advisors that optimize money automatically. These applications can be used by individuals and small businesses.
Another important factor for the success of fintech startups is their ability to secure funding. Investors will typically consider a company’s long-term capabilities before deciding whether or not to invest. It is also important to stay compliant with regulatory requirements. Non-compliance can prevent a new fintech startup from gaining funds.
Fintech startups are also facing stiff competition. Some traditional banks have begun partnering with fintech companies in areas such as identity verification.
Despite these challenges, the fintech sector is experiencing growth. According to PwC, over 80% of fintech companies are now prioritizing customer needs. To ensure they remain competitive, they must utilize cutting-edge technologies like machine learning, cloud solutions, and blockchain.
The fintech market is expected to grow to EUR188 billion by 2024. However, this is only a fraction of the total amount of money invested in the industry. Some of the most popular startups are Revolut, Lending Club, and PayPal.
These startups are disrupting the financial industry by making accessing financial services easier and more affordable. They can help individuals manage their finances by allowing them to receive loans from online peer-to-peer lending sites. They can also make it easy to buy and sell ETFs and stocks.
The fintech industry is one of the most regulated sectors. There are regulations that touch every aspect of the industry.
Branding helps startups stand out from the competition
Startups in the fintech industry need to build their brand to stand out from the competition. Whether they have an app or not, they need to create a unique identity and tell a story about their service.
Fintech startup companies may not have the resources to hire a marketing team, but there are other ways to get their message out to customers. For instance, community marketing can help them attract customers and engage existing ones.
A visual guide can be a helpful tool for customers to understand how loans work, how credit scores are calculated, and what they can expect when investing. Using a video can also increase conversion rates.
Creating a visual experience can be a great way to differentiate your brand from competitors. In fact, 80% of consumers who watch a video are more likely to buy a product.
Another way to attract customers is to create a strong social media presence. If your social media strategy is effective, you can use this to speak to buyers at any stage of the marketing funnel. For example, you can post about new developments, share feedback, or spark conversations that will attract potential customers.
You can also incorporate gamification into your marketing efforts. By adding points of interest and promoting them through social media, you can drive engagement and improve your conversions.
Educating employees about branding is another important part of branding. Your employees need to be excited about the brand they are creating. By ensuring that everyone is invested in the brand, you are building trust and loyalty.
To help you create your brand, you can start by interviewing potential customers. This will give you a better understanding of your target customer’s needs and what problems they have. By identifying those problems, you can craft a more compelling message about the value your company can provide.
Startups can also use online tutorials and graphic design tools to help them build a brand. For instance, VistaCreate is an easy-to-use design platform for SMBs and SMEs.
If your brand is successful, you will be able to control the narrative, emotional associations, and perceptions of your customers.