Mini-Silos: The Opportunity Fintechs Bring to Banks
It is well known that silos have long prevented banks from achieving the ideal customer experience, because they create a fragmented user experience. An executive from Ally Bank made an interesting observation at a recent industry conference. “The irony is that fintechs are creating mini-silos with the variety of options consumers are using,” she said. “This is an opportunity for banks.”
Fintech companies can only disrupt so much. Banks are already their customers’ channel of choice in many ways, but they need to evolve to better meet consumer preferences as these mini-silos suggest.
It is clear that banks understand the opportunity technology brings to improve the customer experience and increase efficiency. In fact, Fifth Third plans to hire 200 developers, engineers and other IT-related staffers with the end goal of being better at digital banking. This decision comes from a 28% increase in customers using its mobile banking app and a 58% increase in the number of customers interacting with the bank solely through mobile applications, all within one year.
As banks begin to offer similar services to their fintech counterparts and enhance current functionality, there are several key points to consider.
Technology is great, but it must deliver
Hertz has deployed kiosks that connect you to live video representatives via phone who facilitate your reservation. The intent is to provide a faster, more flexible option for car rentals. While waiting in line at the counter recently, my colleague was asked if he would like to save time by using this self-service option. Unfortunately, the check-in screens were displaying wait times and when a representative finally answered, they disconnected the call because there was no sound. After several attempts to get one of the machines to work, an employee apologetically walked him back to the counter.
In this case, the technology didn’t live up to its promise to streamline the process.
Regardless of whether you are a car rental agency, fintech, or bank, if your technology is designed to provide a better customer experience it has to deliver—not create more friction.
Keep it simple and make it accessible
If fintech companies have an edge when it comes to facilitating payments, it’s on the side of usability.
Ally discovered that simply changing the navigation of its user interface made a big difference to its customers. The bank removed P-to-P payments from its transfer options because that is not how customers viewed the transaction. They saw it, not surprisingly, as a payment.
Ally also increased its remote deposit capture limit from $2,500 up to $50,000 to better meet customers’ needs.
Making services and funds accessible and transactions seamless, especially through digital channels is crucial for banks. Feedback loops from customers are necessary to ensure mobile banking apps are intuitive and user friendly.
Security is priority number one
Security is where banks have the edge. According to a 2015 American Bankers Association study 75 percent of consumers trust banks most to keep their payments safe. Additionally, an ING International Survey reports that 84 percent of consumers trust their own bank the most to provide a mobile payment app.
The use of biometrics and tokenization is increasing as consumers’ adoption of mobile and online banking grows. Some mobile banking apps offer extra security features such as one-time authorization codes sent via text or email each time a customer signs in and the ability to choose the level of authentication for the device.
The prospect of digital identities is also beginning to surface. Several banks are pursuing partnerships (BBVA Compass and Dwolla, USAA with an unnamed government agency) to allow people to be authenticated once by a trusted provider rather than share personally identifiable information (PII) with numerous third parties, as we do today.
The opportunity is clear—banks that provide a consistent, seamless, secure customer experience will break down the mini-silos being generated by fintech disruptors.