It’s getting tougher for traditional banks to innovate to compete with the emerging neobanks. While many are taking the steps to keep up, these banks must look into replacing legacy infrastructure if they want to stay relevant in the long term.
Today’s guests, Dieter Halfar, Partner at Elixirr, and David Reiss, Programme Director, Strategic Partnerships at Currencycloud, talk about what financial services should be focusing on and what’s next for the space.
In this episode, we discuss:
- Discussing key considerations for a finance company
- Thinking carefully about the product features that you launch
- Core differences between an off-the-shelf banking as a service provider and the orchestration layer
- The importance of customer acquisition and retention for new banking brands
- How to stay relevant as a traditional bank
Putting legacy systems to rest
Obviously, the main difference between a traditional bank and a neobank is the absence of a physical branch. A neobank takes place exclusively online. Because if we’ve learned one thing from the past 20 months, it’s that people want to be able to do things online, with minimal human contact.
Which could be bad news for the traditional bank.
But one thing is for certain: the legacy systems that help power and prop up traditional banks need to be rethought.
“Innovation, in financial services, has never really been about technology. It’s been about creating the capabilities.” — Dieter Halfar
It’s getting more and more difficult to compete with the exceptional, laser-like focus that neobanks have on the customer experience. Traditional banks have done a great job of remarketing and enhancing some of their digital channels, and focusing on engagement, but at some point you have to recognize that your core legacy systems just need to be put to rest.
That your legacy systems are old, outdated, and slowing you down. Keep you from really competing.
Staying relevant as a traditional bank
With the hyper focus of these neobanks, what does a traditional bank need to do to stay relevant? Or is it all just a lost cause?
You have to realize that you can’t out-innovate the market.
There’s no corporation in the world that can say they’ve got all the skills, capacities, intellect, and funding available to out-innovate the market. There’s just too much activity.
So if you can’t out-innovate, you have to build the capability to be able to create strategic partnerships for the right things, and realize the value of using those partnerships to deliver in a different way.
“If you’re able to find an ecosystem to play into, in the embedded finance space, I think you’re absolutely ahead of your competitors.” — Dieter Halfar
The focus should be, “How do I create an organization that can partner at pace, identify strategic partners, and then launch and scale with the help of other partners, instead of doing it myself?”
The harsh reality is that the neobanks have an incredible advantage in that they’re meeting the younger generation where they are. They’re tapping into a desire that is prevalent across a wide array of people. But the traditional bank will always have a much more authentic and relational aspect to it that is hard to replicate. It’s difficult to “technologize” a face-to-face banking relationship with another person.
With the right investment, focus on customer experience, and commitments to divesting of legacy systems, the traditional bank can stay competitive and relevant to customers from every generation.
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Until next time!
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