The Financial Brand Insights - Winter 2021

In today’s financial services landscape, financial technology (fintech) companies and financial institutions (FIs) are often competing for customers, market share and relevance. It’s no wonder that, generally speaking, fintechs are posed as threats, and financial institutions are often viewed as archaic and slower moving. But it doesn’t have to be (and shouldn’t!) be this way. In fact, the best way to compete and thrive in this market — is for fintech and financial institutions to cooperate and allow each to fulfill the roles they do best. Before we dive into how financial institutions must partner with fintech, let’s tackle why they should. FI Is To Trust as Fintech Is to Innovation The average consumer thinks about their finances frequently, regardless of their financial means. One of the hardest parts in combating economic uncertainty and worries is taking the first step to resolve the issue. Fear and anxiety may paralyze consumers from finding and testing a new solution like fintech services. Regardless of consumers’ financial health, many are reluctant to download an app that will draw attention to their financial situation. However, at the same time, most consumers want to improve their financial situation. To do this, they want the proper tools and they want this to come from a source they trust. Who do people generally trust with their finances? Financial institutions. In fact, a 2020 EPAM survey found 82% of people are happy with their bank, and 63% reported TRUST as the primary reason for deciding where to place their primary bank account (figure 1). In contrast, only 40% of financial decision-makers in the U.S. have a fintech account. Older generations— Gen X and baby boomer s— are much less likely than millennials and Gen Z to use fintech as their primary financial management solution. Even though FIs suffered a loss of trust due to the 2008 financial crisis, they

showed up for their account holders in a big way recently, by offering mortgage deferral programs and other relief-orientated solutions to those affected by the Covid-19 crisis. Why Are SMBs Searching for Something More Robust? In the same vein, small and medium-sized businesses (SMBs) are also constantly thinking about and managing their finances. The difference is that SMBs actively seek out help and critical resources to manage this. Since SMBs want to centralize their financial activities, they typically look to their trusted FI first, rather than a fintech company often without brand recognition or a pre-existing relationship. But traditional FIs aren’t always equipped to provide what they’re searching for. While FIs may have trust in the bag for both consumers and SMBs, they have an innovation problem, especially small- to mid-sized FIs. They don’t always have the resources to innovate at the pace required given budgets constraints, and they often prioritize developing “now” projects over those that are important but perhaps less urgent. Additionally, many small FIs don’t even have modern and robust mobile banking apps, which leaves them even further behind the innovation game. On top of that, they have compliance and

Partner &Thrive Why Fintechs and Financial Institutions Need to Unite By Jonathan Price EVP of Emerging Business & Corporate Development at Q2

Financial institutions benefit from the happiness and trust of customers

82%

63%

of people are happy with their bank

reported TRUST as the primary reason for deciding

where to place their primary bank account

THE FINANCIAL BRAND INSIGHTS WINTER 2021