Leveraging Fintech Innovation to Improve Consumer Experience

Customer experience is top of mind for banking and financial services leaders. In the 2020 Digital Banking Report survey, financial institutions identified improving the customer experience as one of the top priorities through 2021, second only to transformation initiatives. 

This can be a moving target, though, as the past two years have changed the face of banking and financial services. While a surprising number of consumers still want to interact with tellers and banking staff, they don’t necessarily want or need to do it at a branch. Digital banking, once thought to be crucial in attracting Millennials and Gen Z has become almost as important to older consumers. Plus, consumers today expect their banking needs to be fulfilled as quickly as their curbside restaurant orders.

Financial institutions are leveraging fintech innovations more and more to improve consumer experiences across the board and for every demographic. As noted in DMI’s recent report, “Top Technology Trends for 2022”, there are a myriad of new solutions being employed through fintech products and innovations that are bringing better, faster, and safer experiences to customers.

4 Fintech Innovations that Improve Customer Experiences

Peer-to-Peer Payments

The acceptance of peer-to-peer (P2P) payment applications continues to grow. In 2018, half of the consumers hadn’t used P2P payments. By 2020, that number had dropped to 36%. Despite initial projections that these applications would be used by younger consumers, they have been generally accepted, and older Americans are ready and willing to use these services. According to a Pew Research Center survey, 53% of U.S. adults over 65 own a smartphone, with that number jumping to 92 percent for consumers aged 50 to 64. 

Consumers want to use the P2P applications that are most convenient, ones that work with their financial institutions and that enable them to send funds to their network. If financial institutions have challenges integrating these services with their banking apps, consumers will find other ways to use them, with 11% of consumers in 2020 reporting that they use 3 or more non-banking P2P payment apps.

Augmented Reality

Many banking customers want options when it comes to accessing their banks, depending on their activities. For instance, a Gallup survey found that those opening or closing an account or applying for a loan preferred to interact with a person, while those withdrawing money from their accounts were happy to do so from an ATM. When looking for new services, though, consumers turned first to online resources.

Augmented reality (AR) fintech applications may be the bridge that brings all of these channels together. While VR is a heavy lift technology for many consumers, AR is accessible from their smartphones. Using an AR application, customers can interact with a teller or personal banker face-to-face, without leaving their home or office. At the same time, banking staff can display important data to customers directly on their screens so that both parties can see the same information. Consumers can get the personal interactions that make them comfortable for certain transactions without the overhead of going to a branch.

Digital-Only Banking

Even though some consumers still desire face-to-face interactions with banks, some prefer the convenience of digital-only services. These services combine the insights gathered from social media monitoring and geographic information to offer high-speed banking services to a new generation of consumers. The decreased operational costs associated with digital-only banks mean lower transaction costs and fees for consumers, something that 15% of those that responded in an Infosys report on the subject identified as a benefit.

It’s an area where newer institutions and fintech providers gain an advantage over established banks. Newer services aren’t burdened with technical debt and cumbersome (but reliable) legacy environments, so they can take advantage of digital banking offerings quickly. They are already steeped in microservices and quick to adopt new APIs. However, thanks to the resources and experience of traditional banks, a shift to more composable business models can bring them even with these fintech disruptors in providing high-quality customer experiences.

Blockchain

From a consumer perspective, there is nothing that holds a financial institution back from a rapid settlement of deposits, payments, and transfers, and there is little reason things like mortgage and loan applications should be a prolonged process. 

On the bank’s side, there’s ample reason. Reconciliation of transactions across the SWIFT network, Know Your Customer (KYC) rules and regulations, Anti-Money Laundering (AML) processes, and fraud checks are time-consuming and intensive. It’s a misalignment between what financial institutions are required to do and what consumers expect.

Enter blockchain. While Bitcoin broke open the door for blockchain in the financial world, there are abundant uses for this technology in the fintech space. Blockchain can be used to rapidly, nearly instantaneously, settle transactions. Supported by a distributed and nearly unhackable interbank ledger, transactions could occur in real-time, opening the door to new services and products for existing customers as well as those previously excluded from the digital economy, the unbanked and underbanked.  

Beyond financial reconciliation and management, banks can leverage blockchain for customer validation. Identity verification can be streamlined using an immutable chain of information to support validation. Although it is growing more difficult, it’s still possible to fake a government ID, an artifact frequently used in the identification process. A distributed identity ledger, however, could be quickly and easily accessible to financial institutions, shortening the validation process and accelerating account sign-up, credit validation, and loan processing.

Using blockchain solutions at a financial institution will require updates and changes to architecture and technology tooling. Even more, though, it will require a flexible mindset within the organization. Many banking applications have been proprietary and for good reason. The concept of distributed data being used for critical processes may take some new thinking on the part of financial institutions before they are comfortable with the security and ease that blockchain solutions can bring to the table.

Fintech Solutions for 2022

Fintech solutions are now an established part of the financial ecosystem. As rules and regulations, like the EU’s Payment Services Directives (PSD and PSD2) mature, innovations in financial technology solutions will go farther than anyone imagined even just 10 years ago. Leveraging these innovations to improve the customer experience means that banks and other financial institutions must continue to push on their top priority, transformation initiatives, or risk missing out on the advancements that keep them competitive while retaining their customer base.

These challenges and opportunities are exactly why DMI is a MACH Alliance partner. We believe strongly that the advantages of a MACH ecosystem are what financial institutions need to maintain their competitive advantage and even grow in the face of disruptions. Future-proofing banking technology makes a composable business model possible for financial services, leading to the rapid inclusion of today’s fintech innovations as well as those that emerge tomorrow. 

To see the kinds of technologies that are influencing industries in the coming year, and how they are disrupting the landscape even now, download DMI’s report “Top Tech Trends for 2022” by clicking here.