Fintech usually has a sexy connotation associated with it, so last week when I was in New York speaking at Bank Director's FinXTech conference, I enjoyed the irony of being on a panel to discuss "The Unsexy Side of Fintech." The conference primarily focused on discussing the impact of Fintech on the Financial Services industry, the current state of innovation, and what’s coming next.
One of the most interesting things I heard during the conference was bankers saying the threat of disruption from Fintech to traditional banks has tremendously subsided. Three years ago the buzz was all about how Fintech was going eat the lunch of traditional banks. Turns out, regulatory pressures got in the way of Fintech companies fully playing in the banking industry. They were not able to displace banks entirely, but that hasn't stopped them from providing key solutions to the industry. Now banking leaders and strategists see Fintech companies as partners, not foes. Interesting turn of events!
My panel topic focused on getting back to basics and not forgetting the fundamentals necessary to be successful in the market. While Fintech point solutions can help accelerate in certain areas, they will never displace the strong focus on customer experience and having an agile operating model that can support the ever-changing needs of the customer and evolving market dynamics.
M&A continues to be a big topic in banking, as consolidation has only accelerated since the great recession started in 2007. Another topic that we discussed was around M&A and how to navigate through the challenges associated with bringing organizations together, both from a technology and operations standpoint. Being a Customer Experience guy, my perspective on this was largely from that of the customer. In an M&A world laser-focused on profits and operational synergies, the needs and desired outcomes of the customer are often forgotten in a transaction, as are those of the employees.
We believe customer experience can make or break an M&A transaction and reduce the value realization of the deal. My colleague John Stockamp, recently wrote a great article on this topic in Bank Director. Banks and credit unions need to understand the combined segmentation model of their customers and build a new operating and engagement model to support your new customer base and brand promise. Banks and credit unions also need to be very intentional about managing through the impacts of the transaction on your employees, because ultimately they are the face of the company to your customers, and they need to be bought in.
Fintech is the fun, new technology, but banks also have a lot of legacy technology architecture they need to deal with. There are practical realities with legacy technologies which limit a banks’ ability to move as fast as they want in the market or to try new technologies. We also discussed this topic on our panel and my point of view on this again came back to looking at things from the customer's lens.
It is very time consuming and expensive to integrate back-end legacy technologies and if you try to do that in a point solution way, it will really inhibit your ability to be agile and responsive. So, my belief is that you should first define and understand what sort of customer experience you are trying to deliver strategically. After that, think through what sort of journeys your customers are going through with your organization. Underneath those journeys sits your operating model that is supported by people, processes and technology (for banks and credit unions, that is usually legacy and clunky technology). Based on your operating model, you can prioritize where to focus, which should be in the areas where it matters the most to delivering a great customer experience. Once you know that, you will be able to guide your technology investments successfully, because you can focus on investing in technology that supports delivering on the most important customer interactions.
During the panel, I recommended that banks should go slow and do the heavy lifting once, to create future agility. What I mean is that financial services organizations should consider building a more simple and flexible cloud based technology layer on top of their back-end legacy systems (as no bank is getting rid of them). This allows banks to bring all of the rich and valuable customer data forward onto a more useable platform. And leveraging a leading CRM system like Salesforce is a great platform for this. A CRM system provides all of the necessary customer data, and then employees can easily leverage it to engage with your customers and provide a better experience. You can also connect other Fintech solutions to this platform directly, which is much easier than having to build connections into your legacy systems. My colleagues at West Monroe recently wrote an interesting white paper on this topic, about becoming a customer-centric bank.
Even with the latest tools and technology in the market, no technology can replace or outperform the results gained from focusing on and building a sound customer experience strategy. If you do that, you can come out on top (even through any M&A transaction). You can also optimize the benefit realization of your technology investments, as well as position your bank or credit union to be responsive to the ever-changing demands of your customers and the financial market.