Trust and Cooperation in the Digital Age
At the time this article was written, the world had not yet been plagued by the pandemic we are all witnessing. It is, however, all the more appropriate, given the moment we are experiencing, that we can talk about trust and cooperation.
Traditional banking no longer meets the needs of everyday life. Digital banks are better and speak the customer's language. Fintech are faster and more responsive.
People in the financial sector often hear the above sentences. But is this the truth?
Banks, and by banks I mean traditional banking, play a vital role in our society. The savings we have (although when it comes to this the rates are no longer what they used to be) and the salary we receive is deposited in the bank, the housing credit is made at the bank, the car loan is also often made at the bank. For most of us, the most important expenses and revenues are also consulted at the bank.
So, what about digital banking? Revolut? N26? Other digital banks or neobanks? The digital means of payment, MBWAY, Stripe? This other side of banking is sexier, it's the colourful side of banking that understands what customers want to do and that never seems to falter.
In 2019, N26 had 3.5 million customers in the 24 European markets where it operates; Revolut currently has about 7 million customers. These digital banks get a large number of customers because they are digital, they are not physically "tied" to a geographic region, the world is their commercial territory.
Although they seem to have a number of advantages over traditional banks, digital banking has not yet managed to outperform the former in one important aspect: trust. The trust required for its customers to deposit their salary or life savings in these digital banks. A traditional bank is, by default, a reliable institution. Such trust is secured through years of service, but also by the rules to which these institutions are bound, whether of a legal, compliance or other nature.
Trust is one of the factors that allows banks to remain one of the pillars of modern society.
However, these institutions cannot stand still (and most are not). They must seek to be closer to their customers, through apps, social networks and the digital channels their customers use. Through the use of fintechs, they can take advantage of the potential that digital banking has to evolve.
Opening an account sitting on the sofa, taking out a real-time credit while shopping at the supermarket and the balance is negative, offering holiday insurance when the customer is known to be abroad, this is something that can enable banks to provide a distinct service. Investing in the user experience is the key.
This level of service can be achieved through cooperation. In other words, cooperation with companies that operate within the financial area and that are heavily focused on a particular experience or distinctive factor: the fintechs.
By combining both factors, trust and cooperation, banks can become more prominent institutions and have a stronger presence in the markets where they operate. They can focus their efforts and resources on what they are best at, build trust with the power they already have, and innovate and get closer to the client by cooperating with fintechs, whether internal or external to the institution.
In times to come, the institutions that best know how to take advantage of these two factors will be the ones that, as Darwin wrote, will be best able to survive.
