FinTechs are turning up the heat on incumbent banks
The pandemic accelerated the global adoption of digital models across numerous sectors, but this was seen particularly in financial services. With recommendations on not paying with cash wherever possible, and bank branches being closed, consumers and businesses alike turned to FinTechs for solutions.
What can banks do to combat this?
During this period, FinTechs proved themselves to be not only competent competitors, but also partners. Banks have the edge over FinTechs when it comes to reach and trust, however, to remain relevant they must overcome their weaknesses: in particular, addressing issues with legacy IT, and delivering a better customer experience.
One of the ways banks can leverage their global reach and trust while remaining relevant is by creating digital-only subsidiaries. In fact, while 25% of consumers said they would try banking products from FinTechs, a whopping 68% said they would try a digital-only offering from their primary bank.
Banks understand the importance of embracing digital-led strategies. Of the 122 banking executives surveyed, 63% said a digital-only subsidiary enables ubiquitous banking, 52% said it makes collaboration with the ecosystem easier thanks to plug-and-play functionality, while 50% said it drives new products to market faster. Not only that, 57% of those surveyed said that they were already in the process of building a digital-only subsidiary, with 27% in the planning state, and 30% starting the process.
The recommendations laid out in the World FinTech Report 2021 focus on the appetite for a digital-only strategy, and centre around three key approaches – greenfield, bluefield, and brownfield.