Big banks have had numerous shots fired across their collective bows in the continuing clash with FinTech startups that have become upstarts. Now, it appears the grapeshot is starting to find its mark, at least in the United Kingdom.
A new study of more than 1,000 decision-makers at SMEs in the U.K. has found that a strong majority of small to mid-sized enterprises prefer conducting business with FinTech firms than with the traditional lenders, especially when it comes to getting foreign exchange transactions done.
World First, which specializes in currency transfers and which conducted the survey, said that, of its respondents, a full 87 percent have pointed to the perception that they get better service from the younger, tech-savvier companies, with 89 percent stating that they would be inclined to recommend FinTech FX services to other potential customers. That far outclasses the 35 percent of respondents who said they would recommend the services offered by their traditional banks.
What’s been driving the mind shift? Simply put, according to the World First numbers, SMEs feel that FinTech firms are better at understanding the business needs of smaller firms — to the tune of 85 percent. More specifically, FinTech firms are perceived as being a bit more flexible than traditional counterparts, with comparatively better transparency on fees (according to 88 percent of those surveyed).
And yet, the reach is a short one, as roughly 30 percent of SMEs did not know of the availability of FinTech firms that could fill FX roles, which implies that there’s an unwittingly sticky relationship with traditional providers. And, even though 30 percent of SMEs have had problems with their traditional partners being unable to meet their needs, those relationships stood in place. That does leave room for improvement as FinTechs try to get their high-tech messages and FX-centric platforms to wider audiences.
In an interview with PYMNTS, Jonathan Quin, founder and CEO of World First, said that among the “higher-value” issues that stood out from the survey were SME desires for a higher level of interaction with knowledgeable people during FX processes, should additional questions arise. All too often, he said, SMEs dealing with banks “might find themselves on hold … or eventually reaching a person” with what he termed “generic” knowledge of a matter, thus elongating to 25 minutes what should be a two-minute interaction.
In addition, noted the executive, the growth of automated services across FinTech allows for at least some specification of how FX transactions may be done, say, same day or hedging out for a week’s time. A sense of urgency may prevail against the backdrop of geopolitical or other events that can make FX rates volatile, with particular impact among electronics, food and beverage firms and smaller-scale manufacturers, he added.
One trend that may emerge from the disconnect between SMEs, their FX needs and their traditional banking relationships, said Quin: partnerships between banks and FinTech firms, where the former approaches the latter, increasingly, to fill in gaps in services. That may prove to be imperative, as industry-wide, said Quin, banks hit hard in the wake of the 2007–2008 global pressures pulled back spending in response and focused more on “short-term balance sheets,” which hit spending on technology and also led to less widespread adoption of new technology platforms.