Incumbents: The New Disruptors

In the ever-evolving world of banking, it's not enough to simply match your competitors. To truly stand out and disrupt the market, you need to innovate to meet and exceed your customers' needs and expectations.

But what do your customers actually need? What features in your propositions and digital experiences are most important to them? These are the questions that banks need to ask themselves if they want to differentiate themselves from the pack.  

Features vs. Customer Experiences

It's not just about providing more “shiny new features” or better prices than your competitors. Having a long list of top-of-the-line features isn’t enough. To be truly innovative, banks must offer a great customer experience and one that is better than their competitors. This year’s survey results showcase room for growth in several areas, including security and user experience.

One clear gap in this year’s survey is biometric cards, with none of the respondents offering this innovative capability. Yet, biometric cards are not entirely new to the Romanian banking industry. Oney Bank introduced the first biometric cards to the market in 2019, setting the tone and raising customer expectations for the banking of the future. Another significant security standout in this year’s results is the distinct lack of dynamic CVVs, with only two banks surveyed offering this feature.

Customer convenience and experience features such as mobile loan repayments, in-app insurance purchases, and personal budgeting tools are only offered by a handful of respondents.

While all these provide convenience to customers, it's not just about them as stand-alone capabilities; it's about how seamlessly they function together and help customers quickly and easily achieve something that is meaningful for them – being able to get the home of their dreams, the car they need to bring their kids to school or the laptop they’ll use to start their new business.

Though a bank may offer a mobile loan application, if the user experience is confusing or convoluted or the approval of the loan takes six weeks, customers may seek out alternatives from competitors.

Happy customers beget more customers. In fact, 78% of people are willing to recommend a brand to friends or family after having a positive experience. This means that giving customers a positive end-to-end experience provides banks with three key benefits: higher customer acquisition, better customer retention and more referrals, all of which are needed to build a strong customer base.

But according to a Capgemini report, 40% of customers say their banks still don’t offer them an innovative and personalized experience. And the number one reason cited by banking executives as to why they are not able to give their customers the experiences they need is inflexible legacy systems. This means that to compete, banks will have to fundamentally rethink the way they build, distribute and service their products.    

Disrupt the Market with Personalized Products & Better Customer Experiences

Banks need to break their digital product and experience innovation free from inflexible core systems so they can meet customer expectations in real time. This doesn’t mean ripping and replacing their existing IT landscape.

Banks can introduce a flexible and agile product and experience innovation layer (known as fintech enablement) that integrates with existing systems and allows product and proposition managers to quickly get new personalized products and digital experiences to market while enriching them with innovative fintech ecosystems services like KYC, open banking and digital payments. By adding a fintech enablement layer, banks can build their propositions and customer experiences starting with the customer in mind, utilizing pre-built templates to create exactly what they need using no code.

The result? Innovations get to market faster.

Rather than relying on costly and time-consuming IT projects for every new digital journey or product offer, fintech enablement platforms empower banks to quickly and cost-effectively get innovations to market. This allows incumbents to build a steady cadence of product and digital journey updates to help them to stay ahead of the competition, react to customer feedback, and keep up with unexpected market changes.

Whether banks aspire to create new end-to-end banking products and digital journeys or fine-tune existing products to cater to specific customer segments, fintech enablement can help them transition from a minimum viable product to a live product in days or weeks, not years.

Merging Innovation with System Modernization

Unlike other approaches to product and journey innovation, fintech enablement platforms don’t force banks to slam the brakes on innovation just to tackle system modernization.

While getting new products and experiences to market quickly is a must, banks also need to think long-term about how they can build a modern infrastructure that supports their medium to long-term growth. Fintech enablement platforms give IT teams a path to modernize their systems gradually and on their own schedule.

By decoupling product innovation from existing systems and using pre-built composable banking business capabilities, banks can fill in the gaps in their core systems and replace specific components as needed. This new approach means that core modernization doesn’t have to be a risky multi-million-dollar project that takes years before producing business ROI. Modernizing core systems can be done in an easier and safer way without disruption to daily operations.

Unlocking the Power of the Fintech Ecosystem

Fintech enablement allows banks to continuously incorporate the latest and greatest innovations from the fintech ecosystem and use these technologies in the service of customers. Pre-built integrations coupled with no-code product and journey designers for business users enable banks to leverage new technologies to reduce time-to-yes, simplify and automate application journeys, or distribute products through innovative digital channels. Incumbents can incorporate cutting-edge technologies without the need for specialized tech talent or outside vendors.

The Bottom Line

Innovation is key to success in banking. By focusing on your customers' needs and expectations rather than simply trying to match your competitors' features, you can stand out and disrupt the market. And with solutions like Fintech Enablement, incumbent banks can act like disruptors and innovate continuously on the products and experiences they offer their customers–all while modernizing their technology to sustain a long-term, competitive advantage.

This analysis was drafted by the FintechOS specialists for this year's edition of the Romanian report Digital Banking Scorecard.

Photo: Pexels