Banks Can Compete with Big Tech by Exploiting the “Confidence” Gap


In recent years, big tech companies have turned to different industries. By applying their knowledge of emerging technologies, they were able to disrupt and overtake established players in the market. And with the emergence of open banking, they are now turning to the financial sector.

Google Pay will soon allow customers of Citibank (and nine other banks) manage accounts directly from the application. Apple launched the Apple Card, his own credit card issued by Goldman Sachs. Amazon now offers up to $ 1 million in loans small businesses. Meanwhile, Facebook plans to launch its own digital currency Diem (formerly Libra) in the United States.

Big banks must innovate quickly to compete with these emerging players capable of offering new digital services to customers. However, while tech giants certainly have key advantages over traditional banks – more development power, better equipped for innovation, and massive user bases – banks hold an important card: consumer confidence. clients.

Who do consumers trust the most?

With life as we previously known it disrupted during the pandemic, many organizations have had to rethink their processes and operations to survive and emerge stronger in the new digital age. Society and business values ​​have changed, and one of the most important attributes we talk about today is the importance of trust. Consumers are more risk averse, with a keen sense of organizations they can trust and rely on.

In recent years, major technologies, and in particular Google, Facebook and Amazon, have faced criticism and numerous investigations into the collection of users’ personal data. From the Cambridge Analytica scandal to the very intrusive eavesdropping of Siri and Alexa, more and more consumers are thinking twice before giving up their personal data in exchange for business services.

Another issue is security. Big Tech’s track record of data breaches, both external and internal, has been called into question. More recently, data from 533 million Facebook users was posted to a low-level hacking forum, while a number of Amazon employees have been fired after disclosing customer emails and phone numbers.

According to a ponemon report On privacy and security, 86% of adults said they were concerned about how companies like Facebook and Google use their personal data. Ultimately, while these companies may offer different services to consumers, from search engines to online marketplaces, their real income comes from advertising, which means data is gold.

The question is, with the evolution of big tech towards banking, will consumers be willing to trust them with their financial data?

All of this means that banks could compete with big tech if they maximize this confidence gap. But technological innovation remains a significant obstacle.

Modern challenges for traditional banks

Unlike big tech, banks – built on centuries of experience – were built for privacy and security. Berno Snijder, former Responsible for Identity and Access Management atABN AMRO Explained, from multi-factor authentication and audit trails to secure processes, “banks have multiple layers of defense before you can access data.”

He continued, “Regardless of what is going on around us, people still trust banks today. It is a haven of peace. When you ask people who they trust the most with their data, they’ll always choose the bank as the safest. ”

But this heritage It is also their disadvantage in the race against the big technological players.

Banks have been reluctant to adopt certain technologies, with the issue of trust and confidentiality being brought to the fore. If a bank decides to use a cloud solution, for example, to deliver a more efficient and transparent product offering to its customers, it should consider its responsibility and accountability for the data added to that platform.

Snijder admits that the banks have been reluctant to adopt certain external solutions:

It’s the syndrome of the non-invented here. Traditionally, banks only trust solutions that they create, manage and control themselves. This has two drawbacks. First, they are very expensive, and second, they are not always user friendly.

The biggest challenges facing banks today are slow growth, profitability and digital adoption as well as strict regulations. Outdated systems and processes can mean these institutions could fall behind big fintech.

“The question is how can we handle this? I think the biggest puzzle we have to solve is how to collaborate with big tech companies we cannot survive by ignoring them or trying to compete with them. You have to find a way to work with them, as a partner, as a competitor and as a facilitator. And the biggest beneficiary should always be the customer, ”says Snijder.

If you can’t beat them join them

With customer experience being a major factor, banks must meet the new technological challenge to improve, upgrade and transform their processes and systems, and build on the digital innovation they lack. At ABN AMRO, this is seen through new partnerships being built with fintech start-ups, academics and hackers, as well as their innovation lab and the introduction of AI, IoT. and blockchain.

Thanks to his Digital impact fund, ABN AMRO partners with emerging fintechs. This allows the bank to stay on top of the rapid pace of technological innovation and offer cutting-edge products to clients, while providing fintechs with the financing they need so badly.

For example, their partnership with Swedish startup Tink resulted in a personal finance management app called Grip. At the same time, their partnership with BehavioSec gives them access to the latest cybersecurity technologies.

Designed to explore new ideas and opportunities for technology, company and product offering, the Innovation laboratory is a prime example of how banks are turning into modern businesses with an entrepreneurial spirit. Snijder explains,

New technologies like biometrics, the smart coffee machine or the identification of fraudulent transactions using artificial intelligence, bring new opportunities (and challenges) that are worth exploring to see if they can improve the ‘client experience.

Maximize trust by creating company-focused tools, features and services

Developing customer confidence is not just about adopting the latest technology. It is about using it to meet the trends and broader demands of society in accordance with consumer expectations. This is what will differentiate and ensure the sustainability of the success of traditional banks.

To really build trust, Snijder tells us:

We must accept that the experience of trust is different for each individual. This means that we must put the customer experience at the center of our service offerings, in line with our responsibility to ensure that banking services are accessible to all. There is a complete transformation from a money driven organization to a society driven organization.

For example, during the pandemic, the bank quickly developed personalized and user-friendly modes of communication: an omnichannel customer experience that offers the possibility of communicating by video for customers, as well as an online platform accessible via biometric authentication or a password, depending on the preference of each customer.

With these options, any customer, regardless of age or tech-savvy, can continue to bank however they feel comfortable. ABN Amro tells us: “There is no one solution that works for everyone, we have to offer flexibility to the customer so that they can choose what they want within the limits that we set. It’s a paradigm shift. Listening to and adhering to clients’ needs nurtures the existing confidence they have.

Supporting customers financially and evolving their offer in parallel with societal changes will be imperative to ensure the future of traditional banking success in a changing digital world.

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