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Fintech: What Traditional Banks Have Learned in the Past 10 Years

Gary Turner


digital-only bank

Gary Turner, co-founder and UK MD of Xero tells DIGIT what the rapid evolution and growth of Fintech has meant to the tier one financial institutions.

Fifteen years ago, banking was advancing at a slow rate. A lack of competition and innovation led the industry to stall, with no disruptors forcing leaders in the industry to innovate. Fast forward five years, and the industry was facing changing demand as millennials began entering their customer bases. The need for digital accessibility was critical, and banks had to move fast or be left behind. The question is, what have banks learnt since the birth of digital natives?

Digital-Only Banks

One of the key indicators of this new trend was the emergence of the digital-only bank. The US was home to the launch of Ally in 2008, which at the time was the first digital-only bank of its kind. As these banks grew, they began to understand the user habits of the younger audience. So, what changed? People wanted to access their banks within seconds, mobiles made that possible. People wanted to categorise their spending budget within their bank accounts, new user interfaces made that possible. People wanted to be instantly notified when their transaction had been processed, app notifications made that possible.

There are two clear themes that revolutionised what the banking industry strives for today – transparency and time-saving. A lot of today’s big banks offer very basic level information, such as money spent and earned. But today’s millennials grew up during the market crash and currently live in generation rent. As a result, they are more money conscious than previous generations, and digital banks have capitalised on this characteristic. Take Loot, the digital current account, as an example. It connects seamlessly with your Mastercard and allows you to create daily, weekly and monthly budgets, as well as notifying you when you’ve made a purchase and informing you how much money you have left to spend that day. You can create sections within the app to set #LootGoals, which are saving targets to strive for, be it a new car or a holiday. Its graphics and tools make money management user-friendly and seamless.

The Customer Journey

Another change technology has affected is the way banks interact with their customers. If you look back at how banks communicates with their users, often times it’s the odd official document through the post, or perhaps an email with a red exclamation mark in your inbox. If you’re worried about finances, or you have questions, the average customer doesn’t know where to turn.

As an example Xero offers an advisor directory which connects the user to trusted partners, ensuring expert advice is on hand when needed.

Bang for your buck

Of course, besides holding money, the other main services banks offer are savings and loans. And what’s interesting is that digital-only banks offer a more competitive service than traditional banks. In fact, if you were to look at the table of the top 10 rates paid out on a five-year bond, you wouldn’t find a single high-street bank.

While disruptor banks, like Tide, may struggle to win over older audiences, millennials have been brought up in an environment where they’re constantly consuming information around unique offerings, it enables them to take their finances into their own hands. The more transparent banks are about their offerings, the more customers from younger generations they’ll attract.

Modernising processes

A big benefit of traditional banking is having one-on-one time with the bank manager, and there’s a sense of reassurance you get from speaking with a professional. But with levels of trust for banks and bankers lowering ever since the market crash, this is now in fact hindering a bank’s offering. How do you regain trust? You give power to the people. And that’s what advanced software does. If you want something done right, then do it yourself, and that’s the approach that fintech has taken. Instead of reacting to bank letters for payments, you can set up your own standing order, instead of requesting your balance sheet, you can access it from your mobile at any time and any place, and instead of requesting payments receipts, you can download the document online.

This merely scratches the surface of what modern banking is achieving, and it’s still not in full-flow. There are still gaps where the consumer experience falls short, and that’s what’s inspiring hundreds of innovators in Scotland to continue creating new and exciting technologies that aim to streamline the experience.

Gary Turner, CEO, Xero

Gary Turner

Co-FOunder & CEO, Xero

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