In my last several blogs, I discussed the various ways fintech can competitively disrupt your business. Presently, there is a possibility that your bank has lost some business due to fintech. With the potential of fintech concerns being granted special purpose banking charters, that probability becomes much higher.
You may not think you have been impacted, but consider this. A few weeks ago, I was reading our local newspaper at breakfast when I noticed a rather large ad from a bank I wasn’t familiar with. It was advertising promotional CDs. The ad directed interested potential customers to its website and/or mobile app.The ad was from Synchrony Bank, a name I vaguely recalled. So, I fired up Google to find out more. This bank was formerly GE Capital Retail Bank. It is huge, with over $69 billion in assets. Synchrony is the largest provider of private label credit cards for brands that include Amazon, Walmart, Lowes, and BP. Their closest branch to me is located in Bridgewater, New Jersey. It is their only branch. However, they are fishing for deposits digitally in my backyard. And probably yours too!
Fintech isn’t always going to be competitive. It can be collaborative as well. For example, your bank may employ fintech resources to expand your offerings to become more competitive, and to increase your customers’ convenience. Fintech in this case can become a strategic partner. So there are two sides to fintech that must be constantly evaluated, the competitive aspects (Rocket Mortgage, Venmo, Synchrony Bank, etc.) and the collaborative offerings that could soon be available.
The first step in preparing for the fintech challenge is reporting its potential to your board. Prepare them by helping them understand that fintech is quite fluid, ever evolving and may become quite disruptive very quickly. Your board will need frequent updates, especially on the status of the proposed special purpose charter process.
Every bank, regardless of size, needs to have a clear understanding of its core vendor’s approach to fintech. Actually, this conversation also needs to occur with not only your core vendor, but also with your internet banking provider and mobile banking provider, if your bank is using third party services for these digital delivery channels. What are they developing? What partnerships have they established? What is their road map? How reactive will they be if something unexpected comes to market?
Ask them about APIs. An API is an application program interface. This is the ‘receptacle’ that allows third party systems to ‘plug’ into your database. APIs typically have only allowed specific database elements to be shared with third party solutions. However, it is entirely possible that the flow of data will need to be bi-directional, data from a third party solution flowing into your bank’s database.
How is your vendor addressing that? It would be unwise of any vendor to think their solution set (now and in the future) will be all that any bank would ever need. My next blog will dive deeper into APIs. There has been a lot of attention given to them recently.
My advice is to update your board on fintech often. And, have frequent discussions with your technology partner regarding their preparedness to support your bank’s needs. They should be prepared to react to fintech disruption, and they should also be incorporating fintech offerings into your bank’s services.