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Almost 90% of incumbent financial institutions believe that part of their business will be lost to standalone fintech companies in the next 5 years- PWC
Do retail banks need to fear Fintech firms? While there might be a number of reasons why banks see fintech firms with a dubious eye and perhaps even alarm, we as users need to ask ourselves: is it a well-grounded concern?
According to Newsbreak, Seventy-six percent of the 543 bank executives surveyed said they fear new payments and money transfer platforms like Apple Pay, PayPal, Stripe, and Venmo more than any other type of fintech competitor.
Arduous bank processes
In the past, banks had invested huge chunks of money into their legacy systems in order to build fully customized and personalized banking solutions for their customers. These systems were designed in a way that each dashboard for the banking scenario looked different, password and login procedures differed and users needed various tokens and release keys to carry out banking processes. This resulted in a veritable digital cacophony of access points and processes for payments. Not only that, consumers got tired over traditional banks’ approaches in meeting their needs.
Much of the demand flow for new, more flexible financial solutions has now been driven by so-called ‘millennials’. Long queues, complex loan applications, strict guidelines, stiff requirements, and many other restraints have led to fatigue with the process. However. banks appeared to be struggling to meet the emerging demands of modern consumers.
Ease with FinTech
On the other hand, ‘FinTech’ is a wider term that encompasses the myriad ways technology is leveraged to design, deliver, and transform financial services globally. The everyday nature of technological innovation enables such firms to adapt to current market demands. Let’s take an example. We have become so busy and caught up in our tight work schedule; the pandemic has made it worse. We are now required to stay cocooned within the four walls of our home, most of the time. Keeping track and managing our expenses, p2p transfers from home become imperative in such times. We then turn to fintech firms.
All we need to do is to create an ID, add our bank account, and we are ready to bank, make payments, pay utility bills and even invest from a mobile device. Fintech firms have enabled international money transfers as well. Other innovative features like mobile wallets, online payments for shopping, p2p lending, crowdfunding, and more with security and compliance make the fintech segment so popular.
According to a survey, 53% of banks and 69% of credit unions view technology giants like Apple and Google as their top competitors in 2020 and believe they will become the hallmark of well-managed credit unions.
Think about companies like PayPal and Venmo that have changed the way people view consumer transactions. Shops in the UK and Ireland have already started using contactless payment through services like ApplePay. What could be the reason?
Given the rise in usage of smartphones, consumers want quick and hassle free services that save time and effort. But traditional banking is typically more product centric irrespective of existing customers’ demand. Taking an example, consumer payments are still stuck with users needing to type their login credentials, verify their OTP, 16 digits from their debit or credit cards, and more. This creates friction and users drop out leading to low customer retention. Traditional Banking has a similar issue. There are a series of technical obstacles that stop them from delivering excellent customer service. A need to stay on the legacy system could be part of the problem.
If traditional retail banking wants to strip off the fear of fintech firms and even challenge them, they should leverage the right technology- Conversational AI-powered virtual assistants. That is not to say that banks should ditch the existing infrastructure and technology or systems that made them successful in the first place, but by integrating Conversational AI into their systems.
Overcome the Challenges in Legacy Systems
At the end of the day, any rule-based system is primitive. The legacy systems that banks follow can only flag activities they’ve been programmed to do. For example money laundering, account takeover, lost cards and more. They can’t adapt to new technological advancements, they can’t recognize new tactics, and when any such issue shows up, they are too slow to resolve or respond.
It can take months and a year after banks realize they are delivering poor customer experience or losing out, perhaps monetarily. They may take months to make changes in their systems to seamlessly integrate with modern tech. That is not a workable time scale that the present consumers demand in the modern financial environment. The banks with Conversational AI can make their banking operations more secure, scalable, and flexible.
The bigger concern for traditional retail banks is the consumer experience they deliver. This is especially challenging, in the aftermath of staying at home. With an overwhelming influx of calls, banks need to be able to offer the same quality of service. Institutions can’t be expected to hire an overabundance of call center agents to handle fluctuating call volumes. They should instead look to the power of Conversational AI solutions which can help them meet rising customer expectations in ways that are not possible with any of their old-school technology. These solutions are extremely scalable and allow banks to offer services to larger audiences simultaneously.
Cloud technology is another aspect offered by Conversational AI systems. This helps banks create a multi-channel relationship with customers in every aspect of the banking service. The cloud assists in storing, creating a backup, and recovering voluminous data that could generally be lost when kept in the physical form or other traditional formats. Banks that leverage conversational AI can accelerate better customer service at lower costs.
One of the important products for retail banking is credit cards, mortgage, and loans. There are days when a customer service agent continuously calls at an inconvenient time and pushes you to take the products. Since fintech firms are less aggressive on that front and most often build a user base, consumers are often drawn to it.
According to McKinsey's report, about $160 billion worth of loans were disbursed by fintech firms in 2017, which will grow to an astounding $220 billion by 2020.
But thanks to Conversational AI retail banks can grow their revenues by designing loans and mortgages according to customer needs, by data aggregation, analysis, and cognitive computing.
In short, adopting Conversational AI is a path for retail banks to meet fintech firms eye-to-eye by offering more customer-centric experiences rather than product-centric experiences.
Adopting Conversational AI allows banks to give customers 24/7 access to retail banking support.
Not only do Conversational AI-powered assistants offer 24/7 support, but they can be deployed in all of the channels where customers spend most of their time, making their banking experience easy and convenient.
Context and Personalization
By collecting data, virtual assistants with the power of machine learning & natural language processing can provide the kinds of personalized experiences that customers wouldn’t otherwise get by simply walking into a bank. This helps them feel like they are being listened to and understood.
Banks investing in Conversational AI strategy can scale with confidence, delivering better customer service and making their mark in a world where there is a fierce competition for customer attention from fintech firms.