This year the financial technology industry will permeate the financial market as never before. FinTech will take center stage, not only with the consumers who leverage its innovative and expanding offerings, but with the banks – large and small – which are growing increasingly aware of its innovations.
I believe that banks that embrace FinTech’s time in the spotlight will have learned three key points from the industry’s growth thus far: its transparency, timeliness and convenience.
When a small business owner’s application for funding is rejected at a traditional bank or credit union, the business owner often has little understanding of the reasons for the denial. Paperwork has been submitted, and a decision has been rendered.
The approach used by traditional institutions in funding hasn’t exactly fostered clarity. I think part of the reason lies with the way in which banks have embraced technology.
While many financial institutions have introduced simple online banking features and apps, few of these approaches have yet to show the same levels of user-friendliness and openness found in FinTech’s online solutions.
There’s a perceived lack of transparency and openness in banks’ operations that doesn’t sit well with today’s consumers, who have come to expect a certain level of transparency in the products and services they use, and those expectations now most definitely extend to banking.
Small businesses that use the leading FinTech funding sites know, almost immediately, if they have been qualified to receive funding, and how much they can expect to get. Banks looking to improve small business’ understanding of their lending metrics and decisions will embrace what FinTech has to offer.
Rather than seeing FinTech companies as threats, banks have begun to partner with them for reasons beyond transparency. Simply, the technological advances made by FinTech companies have come at an opportune time.
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Small businesses want to grow, but they don’t have the staffing to manage the complex loan application process of a traditional bank or credit union. They don’t have the time to wait for what is still, too often, a denial.
Many banks know, I think, that their legacy processes are too cumbersome, but they have been largely powerless to change them.
However today, if they cannot develop new technology in-house, they can layer on FinTech and improve its operations without the complexity and cost of ripping out legacy software.
The banks are learning that, thanks to FinTech’s application protocol interface (API) approach, they can easily test new approaches to lending transactions. FinTech partnerships can become their workshops and beta labs for improvement.
FinTech companies have staked their success on delivering exceptional customer experiences, thanks to processes that are intuitive, adaptive, mobile and cloud-based. They are nimble because that’s what the market has demanded of them.
FinTech companies are agile and have built themselves to continually grow and transform with the needs of small business owners.
Banks struggle to attain the same type of agility that their FinTech counterparts embody yet have been the solid bedrock on which FinTech has sought to improve.
Their air of solidity was what was needed in their industry in the past. But banks have to provide more convenience now—they have to be able move with the tides of change.
With FinTech partnerships, banks can achieve a better customer experience, maintaining and improving upon relationships they’ve been building for years.