It’s been a trying time for fintechs and incumbents alike during the COVID-19 pandemic. Both sets of players have tried to fight off its economic reverberations, though not always successfully. This month, German challenger N26 became the first banking service in Ireland to charge negative interest rates on large savings. And there’s talk, following the publication of the banks’ third quarter financial results, that HSBC could be the first UK high street bank to charge for current accounts offering overdrafts.
But whilst the pandemic has posed common challenges, it has also highlighted – and arguably exacerbated – key divisions in the financial industry. One of those being trust.
The last eight months has demonstrated some polar opposites happening within the financial space. Despite an increase in the number of customers using digital banking services or apps due to the ease and flexibility of the service, some consumers have chosen to move their money away from digital startups and back to traditional bricks and mortar banks throughout COVID (HSBC saw customer deposits rise from $1.374 trillion to $1.569 trillion in the Q3 of 2020).
Globally, conventional banks still account for 72% of the total market value for both banking and payments, and although this has decreased significantly in the last few years as fintechs have shown how differently things can be done, there is still work to be done to become front of wallet for everyone.
It’s a chicken and egg situation. Consumers are naturally sluggish to switch banks without trust. But challenger banking services know they may struggle to galvanise trust, as long as consumers keep their deposits off their balance sheets. So, how – especially as some customers are moving back to familiar, ‘trusted’ brands – can relatively new faces in the market keep and boost their credibility after a year like 2020?
Invest in customer support
The experience a customer has doesn’t begin and end with your product offerings; it extends to every touchpoint in their journey. Whilst it’s important for fintechs to discern themselves from incumbents with slick, digital onboarding experiences, lack of contact points has previously chipped away at the trust factors for some startups. Both Monzo and Revolut have had complaints regarding the way they have handled sudden account freezes or access to funds during COVID. The lack of messaging prior, and the lack of customer support during, clearly has a detrimental effect on the trust felt for even the most established fintech brands, so it is important to get it right.
Customer service can be one of the biggest pillars of a business operation, and this holds especially true in today’s increasingly digital society. People have high expectations for responsiveness, and when dealing with something as sensitive as finances, meeting these expectations is paramount. Look at offering digital options such as instant messaging and knowledge base articles that live in-app or on your website to ensure your customers receive the support they need without searching for it. See if you could add a simple call button into the interface for more urgent issues, and invest in making your support team feel comfortable with handling customer issues of any kind.
The level of support that customers are able to access when they most need it will leave a mark that lasts long beyond the current crisis, so make sure your business is delivering timely and accurate information.
Create a space for feedback
The fintech industry is based on the needs of customers that were unaddressed until now. Although it is essential to understand these ever changing needs, it is not always easy.
Most digital savvy consumers expect companies to be pushing out regular updates to improve their offering, meaning fintech founders constantly need to be on the look out for potential upgrades. Try creating an open feedback loop by reaching out to your loyal customers to invite suggestions on product development or ask what they’d like your next iteration to be. This personal approach helps to cultivate trust by showing customers that you’re committed to delivering the right financial products for them, something they would never expect from a 200 year old bank.
Only by collecting and acting on customers’ digital feedback can fintechs deliver a differentiated experienced that keeps customers enthusiastically satisfied and loyal. This new way of operating shows a flip in the way financial products have typically been designed. It is better to do lots of smaller updates based on customer feedback rather than big changes that might already be behind the curve.
Consider inclusivity for all generations
YouGov data from April suggests that only 9% of Brits can name a challenger bank, which means that some fintech marketing is only reaching a niche segment of the UK market. In many cases this is deliberate, with fintechs focusing on ‘millennial’ and ‘Gen Z’ consumers. But if you’re taking on household names like Barclays and Lloyds, familiarity surrounding your brand needs to reach beyond the 9%.
As Rhian Horgan, chief executive of financial wellness platform Silvur, tells Finance Magnates: “While there is a need to serve those cohorts — and companies benefit from supporting consumers early and creating trust — that focus has also meant a lack of attention paid to older (and already wealthier) generations.”
It’s a no-brainer in terms of market share. Globally, the ‘silver generation’ holds the majority share of deposits in banks. And by 2023, the retirement industry is projected to hit $50 billion. Which means opening up offerings to older generations makes a lot of monetary sense.
As does opening up offerings to the youngest generations. In the UK, a junior stocks and shares ISA (JISA) is still hard to come by, with only a small handful of fintechs daring to take on the child savings and investment market. Whilst more established names like Revolut have retroactively targeted the family unit through its Junior and Premium-linked accounts, newcomers like Strive – which launched earlier this month – are taking this approach from the off. By making modern banking and card propositions inclusive, it’s more likely that the trust hold incumbents have on consumers will loosen.
If you can’t beat ’em, partner with ’em
It might seem obvious, but a way to fast track legitimacy of your new brand in the financial sector is to partner with firms already trusted by consumers. As Google Cloud’s business head, Paul Rohan, pointed out at FinovateFall 2020 in September: “Just your logo isn’t your brand, but what you offer is your brand”, so the more you can offer, the better.
Part of this will mean fleshing out your business-to-business (B2B) play, but that’s already been happening in the fintech world for some time. According to McKinsey, the share of fintechs with B2B offerings increased from 34% in 2011 to almost 50% in 2016 – and that percentage keeps on rising as investors become more interested in the start-up’s powered by alternative business plans.
Of course, partnering with the likes of incumbents is a lot easier said than done. But it’s worth noting – even if it doesn’t seem it – that incumbents are fully aware that they need fintechs to innovate themselves. A study by Finextra last year found 81% of bank executives think collaborating through partnership is the best strategy toward digital transformation.
Keep a healthy dialogue with customers in times of crisis
Looking after customers’ money with robust and secure systems is non-negotiable. That’s according to Julian Sawyer, ex-managing director for Europe at Gemini and co-founder of Starling Bank.
A real test of this came when a number of fintechs experienced days of downtime due to their card issuing partner, Wirecard’s UK arm, getting temporarily suspended by the Financial Conduct Authority (FCA). It had emerged that customer money might not exist, which meant the FCA had to verify its existence before any further transactions could take place – as per UK legislation.
During the downtime, the FCA published regular updates so that fintechs could keep their customers in the know. Fintech Curve got its services back up running over a weekend, tracking its progress via Twitter for customers. Fellow fintech ANNA Money held live Q&As between its founders and customers to keep users in the loop on regulatory developments.
It’s when fintechs don’t communicate or explain downtime – often the biggest crisis for any technology start-up – that customers start to move away from their brand. US neobank Chime went down for a day earlier this month, around the exact same time it went down in 2019. The outage led to customers drawing parallels between the two incidents on Twitter, causing questions around reliability.
A smooth, constantly working digital experience is what defines fintechs from incumbents. So when a fintech app glitches like an incumbent’s online banking app, the trust gap fintechs have to bridge gets murkier and harder to define.
There is no secret to success when it comes to creating a fintech, but when you’re competing against incumbent rivals, building trust is everything.
Discover more insights from Moorwand by reading our other articles.