bankingciooutlook

Fintech 2.0: Skyrocketing Transaction Quality, Driving Customer-Centric Banking

By Banking CIO Outlook | Thursday, August 22, 2019

Financial TechnologyIn the digital age, banks and fintech are collaborating to leverage their respective strengths to revolutionize the finance room and generate viable transaction models.  

FERMONT, CA: Fintech 2.0 places the authority solidly in the customer's hands and focuses on the higher good with fresh players in the financial ecosystem closely aligning with day-to-day requirements. What does this tech revolution mean to banks and financial institutions? Banks are at crossroads — it's clear they need to cater to the ever-evolving customer demands and stand strong in the midst of competition. Is the collaboration of banking and fintech services the new formula?

Collaboration presents an interesting dilemma: in essence, banks are confronted with partnerships and support their competitors' development. While they allow startups to scale, however, banks acquire new perspectives and insights into business possibilities and client requirements in return. This leads to faster industrial progress. Fintechs have taken advantage of the digital technology boom and their absence of legislative supervision over the past decade to construct purpose-oriented offers in fields where traditional financial services players can compete.

As Fintech 2.0 is powered by API routines, banks are adopting APIs as a protocol that enables them to interact almost unlimitedly with customers in real-time. This will be crucial for new solutions that rely on accessing up-to-date bank data such as FX rates, and failure to use APIs in such cases may leave such solutions open to risk. That said, introducing APIs into the sensitive environment and banks' rigid infrastructure–rightly concerned with protecting customer information and internal systems–will require a shift in attitude and a better understanding of the technology at stake.

A multitude of companies focuses on particular client operations in terms of digital payments or loans, insurance products, mutual funds investment, etc. The need to move from transaction mode to relationship mode is evident. Fintech 2.0 concentrates on the population's general economic well-being and not just on specific operations. Customer Lifetime Value (LTV) ratio to Customer Acquisition Cost (CAC) could be one of the primary metrics. Because CAC would be more significant for the target segment, companies would need to concentrate on LTV to evaluate the offer's sustainability.

One way to lower CAC is to develop strategic alliances with innovative, digital-first, economic, and non-financial companies that have formalized their respective economies. For example, on current digital platforms developed by aggregators working in sections such as healthcare, mobility, and hospitality, Fintechs can piggyback and leverage client information to deliver customized products. Fintechs can leverage data from cooperatives and give them particular goods to reach segments such as marginal farmers and workers. The leading enabler could be an architectural asset-light platform that leverages open source technology and sows the seeds of a digital finance ecosystem driven by Fintech.

In this new age of digitalization, the payment space is undergoing substantial changes, including changes to business models, client behaviors, and traditional functions of trade and treasury. By mixing their strengths and building synergies, forward-looking fintechs and banks can be at the cutting edge of these modifications, leading the progress into the digital era together. All in all, Fintech 2.0 is sure to walk along with the digitally-empowered customers. 

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