Urchana Moudgil Co- Founder and COO at Upgrade Pack
Fintech had a moment in 2021. The UK fintech scene overtook the united states in terms of investment and cemented its position in front of the peloton in Europe. In 2021 valuations rocketed and unicorns roamed the town, as fintech started to go mainstream.
2021 was the year the mass market warmed to the idea of a digital only bank. Before 2021 incumbent banks were safe, because consumers didn't expect a lot more than the service they'd got accustomed to. Digital banks have changed the sport, their customers are evangelists for their chosen challenger, sporting their colourful cards in bars across East London. They like it when their bank tweets happy birthday @them because banking for them is a sharable experience
The API Economy
That's not to say traditional banks are going anywhere soon. It's just they're going to have to work harder to maintain share of the market, they need to find new methods to reward and engage their current customers. In reaction, a number of the big banks are embracing the API economy, partnering with fintechs to steal some of their sparkle (as well as their tech). Banks are increasingly partnering up with fintech providers to create new agile services and products that are tailor made for individual consumers, like flexible loans that adjust in real time as an individual earns more (or less) within the lifespan of the agreement.
But it should not just stop at financial products, services and infrastructure. Banks have to start to partner with fintechs in each and every aspect of their business to both retain and attract customers. Just one way of doing this is by adopting tech led, platform-based loyalty and reward programs.
Loyalty deserves rewarding
Why? Unlike many of the baby-boomers and even Gen X and Y'ers before them – Millennials will switch banks and are unforgiving of mistakes. They need to feel special. They require rewarding. Their loyalty deserves it, inside a market place where the grass gets greener on the other side every day.
Banks need to adapt their loyalty and reward programs to be able to stay relevant. The issue is many of these programs have become indistinguishable. They need innovating. Legacy IT along with a focus on acquisition are holding back top tier banks from innovating in this area. But they need to, unless they begin focussing far more on customer engagement they're going to continue to lose market share towards the challengers.
Trust is not enough
Banks in the past have trusted consumer trust. They've considered themselves untouchable when it came to trust comparisons using the new kids on the block. But this too is changing. Research indicates that UK millennials now trust PayPal and Visa more than they do their banks. They also have deep relationships with Apple and Amazon, tech giants rumoured to be not too far away from moving into financial services.
As long as traditional banks remain from the mindset that consumers need to trust and not love them, they remain in danger. It's imperative in 2021 that traditional banks do all they are able to to excite and delight their most valued customers, when they don't some hot young thing having a coral card will.