The era of open banking, PSD2 guidelines and news about API banking are bringing about changes almost every day in a sector that has been stable for many a blue moon. Most financial institutions now realise that the future of banking does not signal the end for banks; the future of banking is whatever they make of it.
The FinTech scene has matured over the years and has demonstrated to itself and the world that it is here for the long run. Despite initial difficulties, banks and lending institutions are increasingly aware that the potential of these young, ambitious players should be exploited rather than shunned.
Smaller lending institutions have already proven that they can react in a swift and flexible manner and skilfully integrate innovations into their existing concepts. Direct banks in particular have viewed the inevitable changes as opportunities and are actively using FinTechs’ services to stand out rather than being overwhelmed by them.
In this blog post we will use 5 examples to show how the financial world can increase revenue, capitalise on new business models and improve the customer experience by working with FinTechs.
FinTechs Digitalise Banking Processes
Innovation, digitalization and new technologies without the need for big investments? XS2A makes it possible! FinTechs are experts when it comes to developing new banking products, whether that’s providing fast account change, multi-banking functions or simple lending in real time. Digital services developed by FinTechs can be conveniently implemented into existing bank processes via an interface known as a banking API.
By integrating state-of-the-art services, banks are not only contributing to their image as future-oriented and digital financial institutions, the financial model is also being revamped and new financial resources are emerging. Customers who are already looking for uncomplicated, digital solutions for their daily finances will be accommodated and will not have to look for alternative providers for each individual service.
FinTechs Help With Customer Retention
Cooperation with FinTechs not only makes banks prepared for the future, it also enhances their attractiveness. Following the old principle that 20 percent of customers generate 80 percent of turnover, a large share of the resources was often made available for customers with large assets. However, many banks are now aiming to expand their business amongst standard customers so that they can make a significant contribution to the overall result in the future.
Thanks to the additional revenue generated from FinTech services, it is now worth concentrating on that 80 percent. The services developed by FinTechs, which banks integrate directly into their platform via XS2A, offer all users an improved and updated customer experience. For banks, this means more added value per customer. With the emergence of new services, financial institutions are impressing existing customers and are providing clear benefits in the competition for new customers.
FinTechs Revitalise the Loan Portfolio
Loans are a traditional mainstay of banks and the work of FinTechs serves to further strengthen this. By integrating FinTech products, banks can offer their customers an accelerated loan application process. FinTecSystems has already developed corresponding solutions for banks and related companies. Thanks to the Digital Account Check, which enables a credit check within seconds, companies such as cashpresso can offer flexible installment payments that can be used in all online shops. The company also makes it possible to quickly approve and pay out loans of up to 1,500 euros to any bank account.
FinTechs also provide solutions for secure account checks and AI-controlled data analysis. Banking processes have always been strongly driven by data and today Big Data can only be handled successfully with machine intelligence. Machine learning enables FinTechs to classify data subject to other data. In concrete terms, banks use this for processes such as the automatic classification of financial transactions and to ensure a secure credit check. Based on this analysis, banks can offer their customers the right loan at the right time without any risk on their part.
FinTechs Provide New Solutions to Old Challenges
Through cooperation with FinTechs, lending institutions can finally offer solutions that have long been on the wish lists of many customers. Personal finance management and multi-banking are important topics for digitally savvy customers who want to keep track of their finances on one centralised platform. Simpler transfers and faster bank lending within the framework of online banking also have great potential for improvement.
With FinTechs on board, traditional financial institutions benefit from secure networks and state-of-the-art solutions that significantly shorten processes that were previously rather lengthy. And all of this comes without any costs for internal development!
FinTechs Open Up Valuable Data
The only way to permanently increase total revenue is to analyse and exploit the potential of as many customers as possible. On the one hand, it is crucial to take customer requirements into account. On the other hand, actual purchasing power must also be considered in order to offer suitable services.
Sales data analysis is a handy solution to identify where opportunities have not yet been optimally exploited and where investments should be made. Sales data analysis uses data analysis tools based on machine learning to help banks understand and categorise their abundance of internal data.
Whereas in the past a number of employees had to invest many hours in data analysis, the amount of work required today has been considerably reduced thanks to artificial intelligence. AI can not only apply, but also develop complex rules across all of a lending institution’s business units. The AI-based solutions provided by FinTechs simplify the once tedious and highly complex process so that today every institution can reap the benefits of intelligent data analysis and data processing.
Are you interested in the topics of data analysis and Big Data in the financial sector? In our new blog article “Big Data in the Banking and Financial World: Hype or Healing?” we explain all the ins and outs of Big Data.
FinTechs and banks should not be considered enemies of each other. Rather, they should recognise that they can both benefit from these new conditions. In fact, they both achieve their goals fastest when they work together. They can help each other to convince customers of their capabilities and to continue playing a leading role in the financial world of the future.