Consumers and SMEs are turning to nimble FinTech startups that offer convenience, competitive services and alternative credit sources. Traditional banks are feeling the heat, claims the World FinTech Report 2021 from Capgemini and Efma, and they are responding by digitizing and focusing on customer experience. IAM can accelerate this digital transformation.
The report is based on interactions with over 120 banking executives and over 8,500 financial service users around the world, and firmly establishes the 2008 global recession as the catalyst that sparked technology-first innovation. Thirteen years on, the FinTechs have proven they are competent competitors and partners and have left an indelible mark on the financial services industry.
Startups vs incumbents
World FinTech Report 2021 found that “twenty-five percent of global consumers are on the lookout for faster delivery, personalized services and convenience.” They are also eager to try banking products from new-age players. No wonder many FinTech veterans have matured into EBITDA-savvy businesses.
On the other hand, FinTechs must not think that they will easily replace the high-street banks. Consumers continue to trust traditional banks, and “68% say they would try a digital-only offering by their primary bank.” Unfortunately for banks, decades of operational patches and intertwined legacy technologies and business models present significant transformation challenges for incumbents. But they must not delay acting: if the financial crisis of 2008 was already a sign of things to come, COVID-19 proved an even more urgent call to action.
Ecosystem orchestration is the future
“If today’s FinTech activity is a barometer, the future of banking won’t include universal entities offering everything to everyone,” the report says. “It will likely feature firms operating in partnership with multiple suppliers to provide integrated products and services. Orchestration is turning new-age banking players into one-stop-shop super apps offering banking and beyond-banking services.”
The bank cites network effects in which a large customer base attracts suppliers, and more suppliers attracts more customers and vice versa. In building these ecosystems, financial service companies can reduce customer acquisition costs, decrease customer churn, unearth new sources of revenue and boost innovation. For traditional banks, turning their apps into a hub central to customer lifestyles leveraged the strength of their large customer base and customer trust, while also turning around their customer experience weakness.
Building a digital strategy
The findings on the advantages of ecosystems in the World FinTech Report 2021 are completely in line with the results from a commissioned study conducted by Forrester Consulting on behalf of TrustBuilder. The study revealed that digital ecosystems are the holy grail of the financial service industry, with eight out of ten financial service companies directing their investments for the next 12 months towards developing digital ecosystems and marketplaces.
Morphing a traditional financial institution into a fresh-faced digital leader is easier said than done and comes with its challenges. Fortunately, tools exist to speed up the process and put the customer central, without compromising on security.
TrustBuilder.io Suite assists financial services companies in every step they make to get more digital and customer-centric. Our IAM solution offers capabilities such as Single Sign-on and Multi-factor Authentication to give banking customers a friction-free, yet secure, experience. And in the back-end, our Service Catalog allows digital product managers to quickly expand their digital ecosystem thanks to the out-of-the-box connections to both Identity Providers and third-party applications. Being cloud-based, the Service Catalog is always up to date, taking away the need to make manual changes. TrustBuilder is a European IAM leader, which means we can easily add new local Identity Providers and applications to our catalog.
Are you embarking on a digital journey? Get in touch and we will accelerate and secure your transformation.