How Can Banks with Digital Offerings Differentiate Among Themselves?

It is a fact that some banks and fintech startups offer pretty much the same products and services but often have a different pricing structure with some added features. That is why customers don’t switch banks often until they see a specific product that is exceptionally rewarding or cheaper.

The transformation of banking sectors has been majorly due to the emerging online businesses, which provide online payment solutions to customers, and that’s how the Fintech companies built the ground for non-banking, online payment solutions.

Many Fintech products have seen a breakthrough by eliminating the roadblock for the financial transactions that occur online. The Fintech-bank collaboration brings agility and technology to enable the masses to use digital wallets at ease. In this blog, we would discuss how banks and fintech startups offering digital products can differentiate among themselves to get a competitive edge.

Key Differentiating Factors to Focus on for the Banks
Here are some key factors that can help the fintech platforms/banks with digital products to differentiate from each other.

• Strategic Collaborations
  Many banks are collaborating with startups that have developed a technological feature. The banks don’t want to develop/manage such a feature themselves since they want to focus on their core business. One such classic example is JP Morgan Chase and OnDeck – they recently renewed their partnership. JP Morgan delivers services to business clients through OnDeck, which provides technological solutions to JP Morgan. This way, both companies can increase their stock value in the market.
• Quick Market Acquisition
  Acquiring the market first and fast is of utmost importance. People tend to download apps that have more users, and the news spread about the product further from word of mouth. Even if you are not the first to disrupt the market with the innovation, you can always acquire a fintech startup or work with IT partners with the experience of developing a similar fintech product at a hyper-speed.
• Capitalizing on Gaps
  Expecting customers to switch from traditional banking to digital channels entirely is a distant dream that fintech startups can not achieve soon. The same is the case for the banks that are offering digital services – they can’t close their retail outlet. The ideal way is to find gaps where traditional banking fails to provide the expected customer experience and then fill it with a digital offering. This is also the reason why a standalone product by a fintech startup may not be able to occupy a large chunk of the market as compared to a fintech-bank collaboration.

Banks Need to Re-think Their Strategies
Although every fintech platform/technology-enabled bank has the same core assumptions, the actual market scenario may differ. Here are some ways in which the fintech platforms/technology-enabled banks can differentiate from one another:

1. Scaling up is the key – but do it strategically
   When thinking about scaling up, don’t just scale based on near-future demand, but keep in mind a scenario in which you would have to scale to another country. A bank should always strive for developing hyper scalable solutions that enable exploring new markets and tap into new opportunities. Also, just replicating the same scaling plan in another country might not work. The solutions need to be extensible enough to add new features quickly to adapt to the new customer base with a different taste.
2. Data security is not important, it is mandatory now
   There are so many data security laws and protocols coming into the picture because of the delocalization of data on foreign servers. Even the customers of today are concerned about how their data is stored and used. Thus, bringing the data security aspect in the initial phases of development is necessary to avoid any security breaches and loopholes in the future.
3. Don’t just enhance customer experience, raise the bar
   Everybody knows that enhancing customer experience is essential, and today, almost every company is doing it on some scale. But just a minor improvement is not enough because the competitors can catch up with you soon. Thus, when thinking about improving customer experience, the focus should be to raise the bar – something which is challenging to copy/achieve by your competitors.
4. Prioritize mobile but don’t limit to mobile apps
   Although some customers are looking for mobile app banking services only, many are still interested in internet banking. Mobile apps are the right way to drive customer attention, but standalone mobile apps are not good enough. For example, Metro Bank has been performing well in a saturated market, utilizing a multi-channel approach by offering all sorts of solutions to the customer.
5. Don’t just send spending reports, analyze the customer buying behavior
   Today, digital banks are conducting customer spending analysis and sending them reports on how much they continuously spend on outside food and their monthly/quarterly fuel costs. This is not a differentiator anymore since most banks are providing this as a standard service now. However, the data in this report tells much about customer buying behavior that can help you to offer differentiated services.
6. Catch-them-young-and-keep-them-forever is not a new strategy
   Many digital banks have developed cool interphase with easier UI/UX to appeal to young customers. However, the money lies not with young customers, but they make money as they grow up. Moreover, everyone is doing it, and it is not a differentiation strategy anymore. Banks need to offer more, even if they are targeting to entice young customers.
7. Services at a lower cost is not an innovation
   Today, the startups are more concerned about acquiring customers and attracting them by waiving foreign exchange, ATM, and NEFT fees. Building a strategy such as having a lower cost base is not an innovation. The real innovation must allow market disruption through a new realm of customer experience.

Unthinkable has helped financial services companies know how to secure customer data and ensure there is no loophole in the system.

Our value proposition has always been about data security and scalability; thus, we can support the banks with more than a million-customer base through our well-designed servers. With the hyper-intuitive UIs and hyper-speed development, Unthinkable methodology has helped fintech startups and financial services companies to develop a platform and acquire a large customer base.

Read More:

How Digital Wallets Can Help in Creating Future-proof Digital Banking

[eBook] Disrupt or Be Disrupted: A quick guide on how fintech companies are changing the financial services industry landscape