The FinTech Revolution That Wasn’t: How Financial Institutions Co-Opted Their Disruptors

It’s the disruption that wasn’t. According to a World Economic Forum report released this month, FinTech firms have not found the traction to overthrow incumbent large financial services institutions. In fact, these technologies have actually strengthened them. Here’s how.

How Financial Institutions Co-Opted FinTech

It’s the disruption that wasn’t. According to a World Economic Forum report released this month, FinTech firms have not found the traction to overthrow incumbent large financial services institutions. In fact, these technologies have actually strengthened them. Here’s how.

Too Big to Disrupt?

We often think of start-up companies as the most dangerous things to existing institutions. You only have to look as far as Amazon and Uber to see the impact lean, tech-centirc entrepreneurs can have on legacy industries. But the new report “Beyond Fintech: A Pragmatic Assessment of Disruptive Potential in Financial Services,” finds this has not been the case in financial services.

The research team, — lead by World Economic Forum’s project lead on disruptive innovation in financial services, R. Jesse McWaters — examined the technologies that could potentially impact the financial services industry as we know it.

Their findings point to a financial services environment in which the large institutional players have so much customer inertia that the smaller FinTechs have had a hard time capturing market share. Meanwhile, the report says, “The rapid growth of the fintech ecosystem allows firms to externalize parts of their innovation function,” and, “The proliferation of fintechs provides financial institutions with a ‘supermarket’ for capabilities, allowing them to use acquisitions and partnerships to rapidly deploy new offerings.”

Where FinTech Succeeds and Fails

In summary, the report finds that FinTechs have succeeded and failed in different ways.

FinTechs have succeeded in:

  • Setting the pace, shape and direction of innovation.
  • Reshaping consumer expectations for service and the customer experience.

FinTechs have failed to:

  • Convince customers to switch away from their incumbent financial services providers.
  • Establish a new financial services ecosystem or lay the infrastructure that could support them in the future.

The net effect of FinTech thus far has not been to show consumers new ways they’d rather do things, but to show the existing institutions how they can provide new services for their clients. That’s a huge difference from how similar movements have impacted other industries. Looking market to market, you have to give financial services firms credit for getting on the bus before it runs them over.

Big Tech May Succeed Where FinTech Falls Short

While adding FinTech capabilities makes existing firms stronger, the report does not let them off the hook yet. In fact, it identifies ight major factors that could lead to disruption in the future.

Chief among those threats is the commoditizing impact of large tech companies taking over the plumbing work of financial institutions. While this will drive down overhead and improve the customer experience, thus enhancing customer loyalty, the report sees the shift as something that could eliminate market advantage and differentiation created by companies that do those things well already.

As data and processes become commoditized by “Big Tech,” and customers become more accustomed to the Amazon-like customer experience that could offer, financial services institutions could become more vulnerable to smaller companies and alternative platforms that allow for customized services and higher customer satisfaction.

In other words, the easier it becomes for customers to access equivalent or better services across a variety of platforms, the closer large financial institutions come to the book stores and taxi companies of yesterday.

How Your Bank Can Generate Leads with Social Media

You are about to discover a step-by-step way to make social media increase share of customer wallet for your bank or credit union. Whether you’re a branch manager, a banking associate or corporate executive at a major institution, keep reading and I’ll give you the key to unlock success.

You are about to discover a step-by-step way to make social media increase share of customer wallet for your bank or credit union. Whether you’re a branch manager, a banking associate or corporate executive at a major institution, keep reading and I’ll give you the key to unlock success. Social media platforms like Facebook, Twitter, YouTube and blogs can help you actually get customers to identify themselves as candidates for your most important products.

Skeptical? I don’t blame you. But think about it. How will it feel to know that everything you’re doing with social media will result in more leads? Let’s get going. Here are my best tips to help unlock the true potential of social media marketing in your institution.

Solve Problems & Answer Questions
Today’s most successful banks and credit unions are setting aside the technical and tactical aspects of social media and, first, focusing on solving customers’ and members problems. I talk about this problem-solving and behavior-focused approach more in my book, Off the Hook Marketing but, in essence, this requires having a focused plan.

Close examination of successful banks, like Wisconsin’s AnchorBank, reveals a key success principle: make everything you do with/on social media answer a burning question or solve a problem for customers in ways that drive behavior.

Scratch Customers’ Itches
For instance, you might use Facebook to spark a discussion among college students aimed on avoiding an increasing problem like personal bankruptcy. Telling true, horrific stories can be paired with sensible approaches—good credit management habits to form. Those sensible approaches can be leveraged into behavior in ways that connect customers’ problems to answers—your products.

But beware: they aren’t just answering questions or listening to customers using social media. They’re taking the time to capture insights on customers’ problems, fears and goals. They are finding what’s itching customers so they can scratch those itches.

Provoke Responses
Are your tweets, posts or updates designed to provoke a response, generate customer behavior? The fact is today’s most successful, socially-savvy banks and credit unions are using social media to provoke responses from customers.

For instance, when using Facebook it’s best to give customers a reason to think about something that’s important to them in a powerful new way—something that gives customers a reason to contact a banker. Why would a customer do that? So they can more clearly understand what you just provoked. Again, consider the prior example with college students.

Translate Need
Now I know this goes against what “the gurus” say but the key to success is avoiding “telling stories” with social media. Resist broadcasting stories; instead, structure interactions with customers in ways that prompt them to tell you about their pain points or financial goals. Once you have this knowledge, your goal is to prompt them to ask questions—that your products often answer.

And beware: don’t stop at informing customers and avoid entertaining them. Focus on purpose-driven interactions that are part of a dialogue—a translation process. Whenever appropriate, guide customers toward products they actually want and need.

That’s it. This is the best, most effective, step-by-step way to make social media increase share of customer wallet for your bank or credit union. Now go get ’em!