We are living in a convenience economy with the rise of apps such as Uber and online retailers Amazon Prime fuelling a culture of immediacy and driving demand for services that are intuitive, easy-to-use and available 24/7.
From socialising to shopping, more aspects of our lives are conducted online today than ever before, including managing our finances.
The rise in online banking, coupled with Open Banking, which allows you to share your data with authorised providers, such as budgeting apps or online-only banks, has led to a number of new fintech companies bursting onto the scene. Not only does this provide unprecedented choice for customers about how they want to manage their money, it also creates a competitive marketplace where cutting-edge fintechs jostle with big, traditional banks for business, leading to further consumer-led improvements.
This increased competition has encouraged financial services providers to take a consumer-led approach, particularly those new to the market, and while this is great news for the user, it can be tricky for start-ups to continue down such a resource-intensive path.
Fintechs are pushing the boundaries when it comes to personalisation and functionality, attracting a tech-savvy, often younger audience. However, without an established customer base or, frequently, a profit-making model, resources can quickly become stretched, putting pressure on the viability of a business.
At the other end of the scale, the major retail banks have an established and loyal customer base, with around 80 per cent of us still banking with one of the ‘Big Four’, and yet there is a worry younger generations, the digital natives, could turn to online-only banks for convenience, particularly as they begin to expand their offerings.
This is why we’re seeing the bigger players investing in digitally-led platforms both within organisations and externally via new start-ups, to ensure they are delivering the best user experience possible.
Fintechs may be more agile, but the major players have a ready-made and captive audience, underlining the trade-off between a customer-led and resource-intensive approach and profit.
This is where the tech giants come in, such as Apple, Samsung and Amazon and we’re seeing them edging into the financial services market. Not only do they have a loyal and established customer base similar to traditional banks, they are also well-equipped for an exclusively digital and tailor-made approach, based on the personal data they already hold and the relationship customers already have with the devices in their pocket and the user experience that comes with them.
Against a backdrop of GDPR and high profile multi-million-pound fines, consumers are much more aware of where their data is held and yet recent research shows that in a retail setting, 90 per cent of users are still willing to share their data in exchange for an easier and more intuitive experience, a trend we’re likely to see across the board with all digital service providers.
Customers are attracted to digital platforms which make their lives easier, but they also like familiarity, and tech giants may well be the missing piece for financial services. However, as we’ve recently seen with Facebook struggling to establish itself in the cryptocurrency market, it is not necessarily a straightforward path.
What it really comes down to is choice. Regardless of how we choose to organise our financial lives, whether at a bricks-and-mortar branch or online, consumers are now in the driving seat and able to switch between providers with ease, which is driving positive change.
Fintechs, big banks and tech giants may seem to be very different players in the financial services market, but they all must negotiate a route to success, with customers at the core.
David Anderson is a corporate partner with Addleshaw Goddard