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First up, they’re backed by big money: We see banks cannibalizing themselves in order for their lunch not to be eaten by a competitor. Often referred to as “intrapreneurship” – the banks either foster a degree of innovation with their own organization or the access to means greater power to acquire other fintechs and consolidate products and power. Now your business may not be backed by big money, but you can definitely foster innovation within your own company. Acquiring another business that has their finger on the pulse of the consumer is also a good strategy for getting ahead. Just remember to get the word out once you do!
Secondly, it’s easy to disrupt something that has sucked: Whilst the banks have an advantage in terms of their experiential legacy; legacy systems, infrastructure and thinking mean that traditional banks and banking apps have sucked. Banks have existed without the need to innovate towards the customers because compound interest is a thing; they set up nationwide branches before the internet was a thing, so the cost of those branches is baked into the fees. Fintechs disrupted this by not having to pay for branches, by having quick and easy to use apps and moving quickly to pivot if things aren’t working. The marketing here, is actually in the product design: users have a great time using the product and tell their friends. It’s as simple as that.
Speaking of which, fintechs spend less on marketing because they don’t market using traditional channels and they have the network effect of an engaged consumer that loves and recommends them. Spending less on acquisition and having higher rates of retention means that fintechs don’t have to charge as much as traditional players to operate.
Having less of a legacy means that fintechs can invest in personalization: Machine learning means that apps can learn about consumers and present a more personal experience. Meaning that your run-of-the-mill fintech can now offer you products and service based on the data they’ve mined about you. So how can you apply this to your business? Simple: get more data and mine it in the most effective way you can. How do I do this? First step: set up a CRM system. Second step: ask customers questions and then use that data to give them products, services and marketing that speaks to them.
Transparency is a weapon that fintechs wield to the peril of traditional banks: Fintechs like LendingTree make mortgage shopping easier by producing greater levels of transparency. Before, banks were the ones wielding the information on their clients and the data powerplay was quite one-sided; now transparency and marketplaces mean that this powerplay is a lot more in favour of the consumer and that drives demand. You can use transparency to tell people what you’re going to do next for them in their onboarding process, things like “breadcrumbs” on your website help people to realise where they are on the client journey and this envelopes them in the warm and fuzzy blanket of trust.
Fintechs do one thing incredibly well as opposed to many things badly: Traditional banks are the jack of all trades while fintechs are the master of one. And now, with PSD2, we can have marketplace banks like Starling which can coral all of the masters of one into one place. Also, doing one simple thing well means that you can also avoid the regulation that comes with offering many different services. Ask yourself: what is the one, simple thing our business does well? How much do we talk about it? Is it aligned with our company’s mission? Do we even know what that is?
If you don’t, perhaps it’s worth a chat.