Ben Brabyn, Head of Level39, looks at whether the public is ready to trust digitisation when it comes to financial services.
The City as we know it is changing. Banks are beginning to see the effects of the digital economy as new, exciting and tech-enabled startups, successfully enter the financial services sector. The breakthrough to unicorn status of Revolut, the challenger bank based in Canary Wharf, where it has grown from a team of only six to over 100 in less than 3 years. This is the most recent example of the rapid success FinTech companies are experiencing over the last few years. Traditional banks are struggling to keep up.
Yet the rapid growth of FinTech does not necessarily mean that the public trusts the fully digital service that these companies are offering. Recent research by the RFi group found that consumers often opted for the online banking applications of established financial institutions over digital-only banking apps. In fact, 49% of consumers globally feel their bank can keep their money safe compared to just 27% for digital challengers.
While the rapid growth of challenger banks is testament to their success, these numbers show that action is needed to counter security concerns. FinTech companies have the opportunity to learn from the actions and regulation established by incumbent banks to ensure their customers feel safe. Firstly, it is about understanding people and their behaviour in the face of digital transformation.
The lack of human contact in a fully digital process can often be found unnerving – a recent poll of British consumers found that people would rather visit their local bank branch for 55% of the most common banking services, from setting up a standing order to applying for a credit card. This was found to be caused by mistrust in digital banks’ capacity to keep customer information safe, with nearly two in five consumers feeling that these banks would share their financial data under the new open banking rules.
It has become evident that to create a relationship of trust with the public, it is essential FinTech businesses reveal the inextricable link that they have with security measures and highlight the minds that work together to ensure a safe service.
The recent TSB crisis may change the way consumers trust traditional banks’ digital capabilities: customers have been unable to access their online banking applications for the past month, not only causing disruption to the service, but also raising concerns of scammers’ involvement in the disorder.
Now more than ever, FinTech businesses need to prove that their experience in digital and cybersecurity would instead enable them to ensure a safe, streamlined service for their customers. As these new entrants have learned the rules of finance from incumbent banks, incumbent banks must acknowledge and embrace the technology expertise of these challenger businesses.
Rather than having to choose one side or the other, the success of the digital economy will be reliant on the collaboration between these two entities. As technology will continue to change the way we live, work and play, consumers will become increasingly demanding of an established, secure digital banking process. It is up to today’s challengers and incumbents to work together to shape the digital future.