Even though it feels like yesterday, 18 months ago my wife and I made settlement on our new construction house. Prior to the ground breaking, we (well – mostly my wife) customized our new house to make it as close to our “dream home” as possible within our budgetary constraints (sadly, we never did hit the Powerball prior to deciding to buy a new house). One of the items we decided to pass on while designing our house was paint. Between the extra (read: gouging) cost, the commitment to finalizing color choices before our furnishings were even in the house, and not having the ability to choose the painter forced us to forgo any color in the new house and settle with “builder white” (a.k.a. primer) throughout.
Fast forward to today and we are ready (finally) to inject some personality and color onto the walls of our house for our 2016 spring project. We researched and listened to numerous painters and their proposals, which I thought was going to be the difficult part. Boy was I wrong! After deciding on who was going to do the job, color selection was next. Seriously, how many shades of yellow are there? This process was much, much longer than I would have ever anticipated. We quickly learned:
- Change can be difficult, especially coming together for an agreed decision
- Being able to budget appropriately is necessary in order to give us the desired results we were looking to achieve
- Investing in a quality product and painter would pay dividends down the road
Now that the color choices have been solidified, I wait patiently for our spring painting project to begin. Interestingly enough, credit unions and banks are starting to mimic our painting project’s “lessons” in regards to utilizing a fintech company to help grow their core business as well as attracting new business into their doors. A recent article from The Financial Brand titled, Fintech Growth Poised to Disrupt Banking Industry really speaks to this and the parallel to our house painting project.
The level of fintech adoption is set to grow significantly in the next year according to a Fintech Adoption index created by EY. The survey found that almost 16% of consumers across the globe that were “digitally active” used at least two fintech solutions in the past 6 months. It also showed that the above percentage could potentially double in the next 12 months, with more financial institutions partnering with a fintech company to provide solutions that they are sorely lacking today.
But with instituting change, especially in the financial services industry, comes push-back, trepidation, slowness to react and a good amount of “business as usual”. Consider this: less than 30% of the largest banks in the United States provide an end-to-end mobile account opening process. Not taking action now will prove to be a detriment in the very near future since Generation X and Y, along with the Millennials will be shaping how banking is done for years to come. This segment of the world’s population is big, very big, and the older customer base is beginning to shrink. This new breed of banking customer is digitally active from early on, whether it is via a tablet, smartphone, or smartwatch; they are connected. So, even if change is difficult, it may be very welcomed (and in the financial services industry, very needed).
One of the biggest stumbling blocks when it comes to fintech adoption is cost. Since the “business as usual” mantra has been the norm for many years in the financial services industry, credit unions and banks have neglected to budget accordingly for a valuable fintech solution. Only until recently has a shift begun, and the institutions that are looking to differentiate from the competition are putting budgets in place. Acknowledging the upfront costs of a fintech solution will reap many years of benefits! Efficient spending is now a top strategic priority for banking institutions. Many banks are moving away from a heavy concentration on compliance spending to instead focus on digital transformation, innovation, or collaboration with fintech firms.
The more and more fintech companies pop up, the more difficult it is for a financial institution to find the right fintech company to partner up with. A simple google search on “fintech companies” will yield an exhausting amount of existing and start-ups in this rapidly growing industry. (And I thought there were a lot of yellow paint choices, ha!)
So what is a financial institution to do in order to weed through all these fintechs? First and foremost, the financial institution should align themselves with a fintech company that can be in it for the long haul. When the credit union or bank needs to make a change on the fly, from offering a new product to reconfiguring how they decision certain loan applications, the fintech must be able to adapt and grow with them. “Future-proofing” should be a major consideration when financial institutions are in the evaluation period to partner with a fintech.
Another method that has proved valuable for financial institutions is to ask for vendor referrals. There are many successful financial institutions using fintech software solutions and achieving fantastic results. Seek them out and talk to them! They love to share their success stories and gush about their fintechs, especially when they look at their performance compared to before they used fintech software. My wife and I had numerous painters come to our house for us to evaluate, and in the end we chose the painter that was referred to us by a couple of close friends. Referrals can really do some heavy lifting in the evaluation process.
Whether you are trying to decide if “pineapple grove” or “good morning sunshine” is your kitchen color choice (good morning sunshine won out) or if, when, and how a fintech company can benefit your financial institution, a decision will have to be made. Change can be difficult, although necessary. However, in the end, it can have very welcome results (whether it be paint or fintech).