Only Connect - The Fintech Imperative

February 23, 2018

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Getting your innovation to market fast is only useful if you then connect with customers – and that’s a struggle for fintechs and big banks alike.

The tech-led era of fintech has put a premium on speed with many businesses measuring success by how swiftly an API can be designed and applied.

Ben Narasin, the veteran entrepreneur and investor in emerging technologies, believes this obsession with speed is a distraction.

“It’s not the first to market, it’s the first to brand,” he said at Money20/20, in a comment which underlines the importance of brand recognition. This challenge is something which experts will tackle in the pioneering FinTech FaceOff online debate on Tuesday, February 27.

So much rests on a name

Inevitably, this is a tough issue for fintechs. Consumer awareness of the new breed of challengers remains low. For instance, research by Decision Technology found that few fintechs have name recognition in double figures among consumers in the United Kingdom.

The most recognized fintech brand, Nutmeg, was known by one in four consumers, compared with 83 percent who were aware of Virgin Money, the least recognized big bank.

When the dentist’s chair is more attractive

It’s difficult for newcomers to break through that awareness barrier – not least because customers are resistant to grappling with their own finances.

Harit Talwar, Head of Marcus by Goldman Sachs, reminded us in his Agents of Change interview that 70 percent of millennials would rather visit their dentist than their bank. Meanwhile, millions continue to pay high interest rates rather than investigate new loan providers. “The key challenge is customer inertia,” he said.

And for those who do succeed in scaling up, growth carries its own challenges. At LinkedIn, we’ve seen several brands run impressive and successful acquisition campaigns. The downside is that they risk being commoditized as they grow.

The disruptors can be easily disrupted themselves, as they scale beyond the low-hanging fruit of early adopting consumers.

It’s experience, not product

Attention-grabbing products are one way to seek consumer attention. But many in the industry take the view that it’s in the realm of customer experience that fintechs must differentiate themselves.

Santander’s OpenBank is candid about its use of an off-the-shelf core banking product: “Our brand is user experience,” an executive told Money20/20. ING’s Ralph Hamers agrees that banking products have become commodities: “You cannot differentiate through product; you have to differentiate through experience.”

Brands that solve a customer’s problem, or remove the stress from a pain point, can break through. That’s the thinking behind Goldman Sachs’ recent partnership with tax software brand Intuit. When filing their tax returns, customers are assisted to find better products to help them deal with debt that they might have been reluctant to discuss.

Whose brand is it, anyway?

Things get more complicated for brand platforms built through partnerships, generating uncertainty over who “owns” the customer.

Some fintechs don’t see it as worthwhile to compete in that space. Silicon Valley Bank, which serves high-growth start-ups, is having to “give up on trying to own customer mindshare,” according to its Head of Payment Strategy and Solutions, Reetika Grewal.

The partnership conundrum is an issue for incumbents too. Customers who make a transaction via Apple Pay are likely to see that as the brand they’re using; the bank behind the interface becomes masked.

From geography to values

One fintech staking everything on brand is Aspiration, which launched its services as an ethical alternative to traditional banking.

Its founder, Andrew Cherny, told Money20/20 about his research to find out how customers selected their bank. Three-quarters simply chose the branch closest to them (though that was true of only 35% of under-35s).

Cherny poses the question of how people will make their choice when most branches have gone. He believes that once geographical proximity is out of the equation, consumers will opt for the brand closest to them personally in terms of values or relationship.

Yet, as Cherny points out, “oil companies are more differentiated than FS companies.” When it comes to branding, both incumbents and challengers have their work cut out.

Join us on Tuesday, February 27, to hear these issues explored online at FinTech FaceOff. CapGemini and LinkedIn, in collaboration with 11:FS, are gathering top financial services influencers from the United States and Europe in debate – and you can vote for the most convincing future predictions. Register here.