During the pandemic, the fintech sector proved to be more resilient and better equipped to adapt to the sudden digital shift. While others may have been struggling to maintain operational capacity under newly-found pressures, fintechs leveraged the circumstances to further drive innovation and fill in the emerging gaps in provided services.
Quite a few risks that may hinder the financial industry’s growth remain, thus when will the market recover to its full extent is still uncertain. In light of fintech-resilience, there are a few lessons that could be learned and incorporated into other financial institutions’ practices, which could aid in facilitating recovery for the entire market.
Get used to diving head-first
Fintechs are used to challenging – as well as being challenged by – the status quo. After all, at their core is the desire to identify opportunities, which lay dormant in the market, and look for ways to help them see the light of day. Thus, in a way, the pandemic-caused turmoil has not caught them off guard.
This approach, albeit, cannot be adopted overnight but is something that FIs could utilise to become more economic-resilient. One of the ways to put the idea to use would be to re-examine their current product suite and scan for any untapped possibilities. It is important not to be eager to dismiss unlikely ones, too: what now seems improbable may one day become the new normal.
Increasing operational flexibility
The pandemic was a ruthless wake-up call for everyone who thought focusing on digital service accessibility was not yet a priority. Following a wave of brick-and-mortar shutdowns, consumers shifted to digital alternatives to keep track and manage their finances. For instance, in Europe alone, there has been a 72 percent increase in the use of financial and mobile banking apps.
Struggling to shift their focus to digital-first, many traditional finance institutions were weighted down by complex and, in some cases, inefficient legacy systems, which Fintechs are not burdened by. As technology is part of their DNA, they implement new solutions faster – this enables them to quickly bounce back even in an economic slowdown.
Now, they have set a standard to follow in terms of digital service efficiency. FIs should leverage this digitalisation momentum to further drive their own growth, either utilising in-house resources, or, perhaps, even seeking out partnerships with fintechs.
Prioritising customer experience
While traditional players are still in the early-stages of adapting a more personalised approach, Fintechs are already putting customers in the spotlight. In fact, a survey by PwC found that 53 percent of banking sector representatives believed their business to be consumer-centric, compared with 80 percent of fintech sector respondents.
In addition, fintechs often utilise more digital communication channels, such as social media, enabling them to build a better connection with their customers. The thing is, because of that consumers now have the same expectations of approachability and communication for other financial service providers they use as well. Therefore not having a presence in the online world robs FIs of potentially significant advantage to reach and retain a wider target audience.
While some FIs complain regulation may be hindering their growth, Fintechs look for ways to navigate through regulatory hurdles by reinventing their approach to fit into the compliance framework. As the regulatory landscape for them is evolving ever so quickly, they have learned to embrace these changes, provided the regulator is keen on fostering a dialogue with the market players.
Relationship between FIs and the regulator should not be viewed from the point of constraint, rather perceived as a mutual effort to manage associated risks. All in all, the key is focusing on building bridges and not diffusing responsibility.
Benchmarks to follow
The current circumstances highlighted the resilience, ingenuity and adaptability of fintechs. As we move slowly towards post-pandemic recovery, reflecting upon these practices may aid others working in the financial sector to equip themselves with the right tools and mindset to thrive in the aftermath and not succumb to external pressures.