Fintech in the FX industry provides better services than banks?
A recent study conducted by World First, an international payments business, surveyed 1,006 senior decision makers in small and medium sized enterprises (SME) in the UK and found that when it comes to foreign exchange, 87 percent get better services from Fintech companies rather than traditional banks. Following the 2008 crisis and the advent of […]
A recent study conducted by World First, an international payments business, surveyed 1,006 senior decision makers in small and medium sized enterprises (SME) in the UK and found that when it comes to foreign exchange, 87 percent get better services from Fintech companies rather than traditional banks.
Following the 2008 crisis and the advent of Fintech, business to business relationships in finance have progressively grown towards the digital world, threatening the banking status quo.
However, the study also made clear that 31 percent of the SMEs are unaware of other providers aside from traditional banks, meaning there are still plenty of potential clients to engage in the FX business. Less finance and tech savvy countries will probably show even higher figures.
Jonathan Quin, CEO and Co-Founder at World First wrote
“Whilst SMEs have historically had to rely on the big banks for any sort of financial service, genuine innovation and technological development from the FinTech sector has given rise to a wide range of truly compelling alternatives. This new breed of specialist providers are often better placed to serve the needs of SMEs than traditional banks, offering greater flexibility for the user, more transparent pricing and, ultimately, better value”.
In late 2015, a joint research study by Mysis and Efma had also concluded that Fintech companies are forcing banks to adapt and adopt digital methods as well.
“The retail banking industry is in flux. With the rise of the internet and connected devices, the industry has been prophesying the demise of traditional banking for almost a quarter of a century. Yet, today, many institutions remain poorly equipped to keep pace, let alone take advantage of digital banking”, revealed the joint research study from Mysis and Efma.
Unlike many established online retailers, banks continue to rely mostly on branches for customer acquisition, accounting for 41% of sales, followed by word of mouth (21%), and advertising (20%). Online banking in-app advertising (5%), online comparison sites (4%) and mobile banking in-app advertising (3%) come to a total of 12%.
“By 2018, millennials (current 18-34 year olds) will have the highest spending power of any generation. And by 2025, three out of every four workers globally will be a millennial. These digital-natives check their smartphones 43 times a day, on average”, said the paper, revealing that by then, bank sales via digital platforms are expected to rise, with 9.2% of firms expecting over 50% sales through digital. Still, 61% will be below the 25% threshold.
“Core banking technology is critical to connecting the front, middle and back office in a way that transforms banks into truly customer-focused, profitable sales operations. Core banking technology must address today’s customer and feature digital channels at the heart of the solution in order to future-proof the banks’ software investment. ”, said Vincent Bastid, CEO at Efma, noting that core systems are precisely the biggest technological barrier to 61% of banks, which leaves 71% of retail banking executives in the US considering non-traditional competitors as a threat.
Simon Paris, President and Chief Sales Officer at Mysis stated
“There is a fierce battle between banks and fintech start-ups to win and steal customers; to capitalise on, or create a switching market. The players who will win will have the most innovative and competitive financial products; will be digital-first; and will have superior customer service processes and teams”?
But behind the frontline, sales processes within banks need to reflect the new interaction models. Digital must start earning its investment, and become a sales channel. Processes will become fully-automated. Banks need to become more resilient, more efficient and more competitive, if they are to survive the next decade, amidst the digital disruption that has arrived.”, continued Mr. Paris.
As for interesting statistics: one in five banks perform less than 1 per cent of sales via digital channels and 26% rate “tech” as the biggest obstacle to customer-driven sales. According to World Retail Banking Report in 2015, customers’ propensity to leave their primary bank (especially Generation Y) is on the rise, while less active in making referrals and buying additional products. Technological adaptation is an imperative, according to the Mysis/Efma study, with the digital customer-driven sales being expected to rise from today’s 13% to 75% in 2018 through customer awareness and adoption of digital methods.