The most of the Fintechs which are well-known in public take their publicity from the fancy new ways of interaction with the customer. This seemingly new and futuristic new banking is what the people like to talk about and like to take as prove for the inability of banks to cope with the future. But it is not necessarily the philosopher’s stone for banks…
Great interfaces, great apps
Where the competitive differentiator?
The reality is, in my opinion, that new and fancy interfaces like cool reports, that show the client for which she spent its money or banking facilitations like the Photo-to-Transfer apps, that read your invoice via smartphone and prepare it for you are really a great help but not decisive for banks in the current fight to survive. As, for example, I have most of my financials on a non-paper basis, only a very small amount of invoices are coming in by paper, mostly doctors and the government for retrieving any parking fines. For these a photo-app is perfect. But nearly all of my banks have this feature; it is no more a competitive differentiator. Except for one bank, that has not this feature: It is a typical savings bank and is local based. And right now I have the need to pay on my account money and guess what, all of the fancy banks with the great apps have no way foreseen to pay cash on the account!
Better lower your production costs by digitalization tools
I have and will always represent the stand point that a bank either needs to reduce the production costs or create real differentiation between banks. The second is a little bit the dilemmas we all know perfectly well as client. There is no clever savings plan out there or some very risk taking bank that gives money when you really need it. The first is mostly blocked by the simple fact, that the margin you can create with retail clients is significantly low, thus a real intelligent effort in this area is not efficient, banks better put their money and clever people in the derivate or M&A sector. The latter is mostly regulated by the authorities. Banks have less and less room for own decisions.
Fintechs rather support than attack.
This is also what we see on the collaboration between banks and Fintechs. There you see a complete change over the last few years. Many startups realized that it is really hard to deal alone with retail. Reasons are mainly high customer acquisition costs, information security costs and the power of complaining clients that are anything else than relaxed with their bank. We now see more
and more the strategy of working together with banks. And here we have than the situation that this new and fast start-up people ram on the banks with their culture and their legacy systems. Both are the obstacles for modernization of banks. And both are now endangered by the fusion of banks with Fintechs – hopefully endangered and in future overcome!
Yours K-Street6 Team