Changing customer demands are challenging and disrupting businesses globally. But if any industry is subject to tough love, then it’s the banking and financial services industry. It’s expected to play a vital economic role, but many view its existence as a necessary evil.
This reputation has led to a number of challenges for the industry. Aside from meeting greater customer expectations, there’s the ever-increasing cost of regulatory compliance, changes in consumer preferences and, significantly, the erosion of market share as younger more nimble FinTech companies gain a foothold in the industry. In fact, 50 percent of the incumbent revenue in the banking industry is lost to FinTech competition.
So how can these traditional brick-and-mortar incumbents stay relevant?
Put simply, banks must fundamentally review their service model in order to win over their customer base. The key to this is undoubtedly digital transformation; this means re-imagining financial services processes through seamless digitised experiences.
Customers no longer want, but expect financial services to be available online – 24/7.
As digital engagement has become imperative, finance startups with the up-and-coming ideas to deliver this will hold a greater amount of power. The truth is that startups have more ideas than financial incumbents because they face fewer barriers to digitally transform. Incumbents, however, are quickly realising that a combination of the two is of equal benefit.
Through Telstra Ventures, our corporate venture capital arm, we’re providing the impetus for some of these collaborations. This year, we increased our portfolio so that it now includes over 40 technology companies.
Whispir, one of our investees, is helping financial institutions to create meaningful dialogue with their customers through cutting-edge digital engagement and customer communication innovations. Its ideas were recently leveraged by Credit Union Australia (CUA) who sought out Whispir to provide a more robust and cost-effective 2 Factor authentification system for their online banking system.
The positive customer response led CUA to quickly expand its work with Whispir to also include enhanced IT service management and customer communication. This has helped CUA to improve its overall operations by delivering customer communications through the right channels, and on the right devices.
Another investee, Singapore-based Near, is helping financial institutions to better align their products to customer needs by delivering data insights that can predict customer behaviour.
The potential of this idea is already being put to use by one bank who is using Near’s data science models to identify,and reach out to prospective home buyers. Through this idea, this bank is tailoring its service model to more effectively serve customers with different needs and expectations.
Whether reshaping service models or starting anew, it’s evident that startups are helping to create the customer experiences that will allow financial institutions to flourish and thrive long term.
It’s a brave new world; one where startups can work alongside the financial industry to effect swift change. And if it continues to take off, finance startup founders will have more opportunities at their disposal than ever before.
Find out more about Telstra Ventures.