How Technology Is Leveling The Playing Field In Banking

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In a recent conversation, Richard Steggall, Co-Founder and CEO of Urban FT, and MPD CEO Karen Webster got philosophical as they addressed how technology’s impact in the banking space has begun to mirror what it’s already done in retail — in effect, “democratizing” the playing field for services of all sizes and scope.

Steggall, for his part, believes that the evolving level of digital elements and platforms available to financial institutions has “definitely put them in a position where they can be part of the ecosystem and be considered equals.”

While banks’ successes (and failures) have historically been largely determined by their physical footprint, the digital revolution has allowed financial consumers to be less reliant on brick-and-mortar branches as technology platforms have grown to enable them to perform their transactions “as and when it suits them,” notes Steggall.

The benefit is not just on the consumer end, of course.

The same innovations that have given banking customers greater flexibility have put the banks in the position to service their clientele in a more customized fashion, thus expanding the institutions’ appeal and opportunity for growth.

Taking advantage of that opportunity, remarks Steggall, “really comes down to the services [that banks can provide], as opposed to the access.”

How Banks Are Capitalizing

With the reality having set in across the banking industry about four or five years ago that “digital was where every bank needed to be,” says Steggall, today every bank (within reason) has some form of digital presence.

The institutions’ efforts to now take things to next level, as it were, are largely driven by a focus on how to become more relevant to their customers in terms of matching their offerings to consumers’ day-to-day lifestyles.

To that end, there are commonalities in banking services that touch all of the “lifestyle categories” that Steggall describes, including remote check capture (which he views as “one of the biggest and most successful product extensions that has come into the banking sector”), balance inquiry, statements and transfers.

In terms of more targeted offerings, banks that are looking to reach the 35-and-older demographic, for example, are integrating a large amount of lending functionality, while those that want to service the millennial end of the consumer spectrum are doing so with offerings related to instant cash access and instant transfers.

“Lifestyle Functionality,” Not “Financial Functionality”

Steggall tells Webster that Urban FT, in its business of providing white-label digital platforms to financial institutions, refers to the functionality that it delivers as lifestyle-centric, rather than financial-centric. It’s a perspective that banks could benefit from applying to their quest to deliver services that are relevant to their own customers’ day-to-day activities — a multi-faceted challenge in and of itself.

To meet it, Steggall advises that banks begin by asking themselves a series of key questions:

–   How is a service relevant to their particular demographic?

–   How can it be used in a way that increases their lifetime value to their customers?

–   How can it be used to increase engagement with their brand?

–   How can it be used to deliver more value to the end user?

Once those objectives are determined, banks can move on to address the more specific question of how to manipulate and configure the technology in question to deliver on them.

It’s something that Steggall has begun to see banks grappling with. And many are hesitant to dive headlong into the use of untested technologies out of concern about jeopardizing what financial institutions by and large view as their most valuable connection to consumers: trust.

The Security Concern

In his discussions with banks, Steggall has often found that “if they’re not absolutely certain that what they are rolling out to market exceeds industry standard security requirements, they’re not going to take a gamble.”

“And you can’t blame them for that,” he remarks to Webster.

Similar to the range of interest in particular banking services, consumer confidence in their financial institutions — and their willingness to try new digital offerings — tends to vary depending on the demographic.

While security is as much on the mind of the consumer as it is of the bank’s, Steggall has observed that older customers (the aforementioned 35-plus range), given their general awareness that “ultimately they’re protected” by a bank’s liability arrangement, are more comfortable trying out new technologies than are younger banking customers.

In any case, a lot of banks take a “wait and see” approach to new digital offerings, observing and learning from the experiences of other companies that opt to implement them before taking them on themselves.

Of course, in that paradigm, somebody has to go first.

Who’s Leading the Way

As for the drivers of technological innovation in the banking space at the moment, Steggall breaks it down into two categories: startups/early stage companies and bigger banks.

The organizations within the first group, by nature, consider themselves “disruptive forces within the B2C space,” posits Steggall, and the innovations they have brought forth have prompted those of the second group — the bigger banks, as well as the payment networks — to take innovation seriously and move forward with their own efforts.

If there’s a category within the banking space that has not been as much of a driver of innovation, on the other hand, Steggall finds it to be those companies “in the middle” — quite literally, in terms of size, in between startups and established institutions: mid-tier banks.

Those companies, which by nature of their business model — simultaneously too established to widely pivot via experimentation and not established enough to buffer themselves against the risk of dipping a toe in the water — are now in the position of needing to catch up with innovation.

Now that they’ve seen what works and the positive impact that new digital offerings have on serving customers’ needs, these mid-tier financial institutions are in the best position of all to benefit from implementing them.

Although mid-tier FIs have largely played it safe and taken the aforementioned “wait and see” approach to technological innovations, those same innovations, in Steggall’s estimation, are now a bigger opportunity for them than they are for big banks.

In fact, at this point, concludes Steggall in his conversation with Webster, “the big banks probably stand to lose more than they stand to gain in this situation.”

Score one for the “wait and see” method of doing business.

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