The report: Surviving the FinTech Apocalypse: A Guide for Retail Banking Teams [May 2024]
Source: Glassbox
Why we chose this report: Despite slowing funding rounds and increased regulatory scrutiny, fintech disruptors continue to erode market share. This report equips bankers with the knowledge and strategies needed to adapt, providing a comprehensive analysis of the fintech challenge and the tools required to address it.
Retail banking is undergoing a transformative shift as fintech disruptors — armed with sleek apps, competitive rates and a laser-focus on personalized customer experience — gain market share. It’s a new era, one where traditional approaches may no longer suffice.
However, retail financial institutions possess unique tools that could prove instrumental in navigating this digital competition. Embracing change, adopting agile methodologies and placing the customer at the center of every decision are key to success.
Glassbox’s recent guide explores the current retail banking landscape, the strategies fintechs employ to gain an edge and the actionable steps banks can take to adapt and thrive amidst this disruption. It offers insights into the ultimate fintech challenge and the innovative tactics needed to address it.
Key Takeaways:
61% of banking customers want personalized recommendations and 72% rate personalization as “highly important” for financial services.
Retail banks can adopt fintech strategies such as customer-centricity and adaptability by using agile methodologies and the “Jobs-to-Be-Done” (JTBD) framework.
Successful FinTech disruptors prioritize optimizing the end-to-end digital customer experience, rather than improving isolated channels or product lines.
Acquisitions and partnerships alone are insufficient; retail banks must address the structural challenges that make them vulnerable to fintech disruptors.
What we liked about the report: The narrative style and format of this report elevate the conversation around fintech disruption, adding insightful quotes, data points and perspectives. It provides a solid foundation for bankers navigating the digital revolution, offering a clear analysis of the challenges and a compelling case for embracing agility and customer-centricity.
What we didn’t: While the role of technology in retail banking’s evolution is critical, the report could have benefited from including specific digital tools banks and credit unions can adopt from fintech strategies.
The Evolving Landscape of Retail Banking
In this transforming financial landscape, Glassbox identified three emerging key trends:
1. Seamless digital experiences are essential.
2. Traditional boundaries are blurring, with fintech and tech giants entering the banking space.
3. Customers are rarely loyal to any one brand or firm, constantly seeking better rates and experiences.
To better understand and respond to customer needs, retail banking teams can adopt agile methodologies, such as breaking down large projects into smaller, iterative cycles, consistently gathering and integrating customer feedback and fostering cross-functional collaboration. Successful agile teams in banking share five key characteristics:
- The right mindset
- Constant breakdowns of projects and teams
- Consistent communication
- A central source of truth
- Constant integration of customer feedback
Real-World Examples of Agile in Action
Several retail banks have already begun to embrace agile methodologies with impressive results. J.P. Morgan, for example, has appointed “mini CEOs” to operate its tech divisions like startups, managing around 50,000 technologists. The bank’s Asset Management team also adopted an agile approach for their equities desk product, fostering a “swarm mentality” between development and operations teams, ramping up communication and establishing a central source of truth. This shift led to reduced risk and more streamlined processes.
ING, another early adopter, kicked off their agile transformation in 2015 by establishing “tribes” across different domains, which were then broken down into self-steering, cross-functional “squads.” Each squad was responsible for a specific customer need and stayed together until the task was complete.
The success of this experiment led ING to roll out the approach to more than 40,000 international employees within two years.
These examples demonstrate that agile methodologies can be successfully implemented in large, complex organizations like retail banks. The key is to start small, foster a culture of collaboration and experimentation and continuously iterate based on customer feedback.
Read more about fintech threats:
- Do Challenger Banks Still Have the Advantage?
- A Focus on New Products May Push Varo to Profitability
- How Fintech Is Disrupting Traditional Banks in 2024
Jobs-to-Be-Done: Understanding Customer Motivation
While agile methodologies help banks respond more quickly to customer needs, the Jobs-to-Be-Done (JTBD) framework takes customer-centricity to the next level by uncovering the underlying motivations behind customer behaviors and decisions.
The JTBD theory, developed by Clayton Christensen, posits that customers don’t simply buy products or services — they “hire” them to do a specific job.
By understanding the jobs customers are trying to accomplish, banks can design more relevant, personalized experiences that address real customer needs.
For example, a customer might “hire” a savings account to achieve the job of “saving for a down payment on a house.” By understanding this job-to-be-done, a bank could design a product that not only offers competitive interest rates but also provides tools and resources to help the customer plan and budget for their home purchase.
The Jobs-to-Be-Done (JTBD) framework is another powerful tool for retail banks. It focuses on the underlying motivations behind customer decisions and behaviors, enabling banks to design more relevant, personalized experiences. To establish JTBDs, teams should:
- Discover the primary job through customer interviews
- Elaborate with related and emotional jobs
- Align JTBDs with products and services
- Integrate JTBDs with customer journey maps
Overcoming Resistance to Change
Adopting agile practices and embracing a customer-centric mindset can be challenging for traditional banks with deeply entrenched hierarchies and silos. However, the cost of inaction is significant. As fintech disruptors continue to gain market share, retail banks that fail to adapt risk losing relevance.
To overcome resistance to change, leaders must communicate a clear vision for the future and empower teams to experiment and innovate. This may involve providing training and resources, breaking down silos and rewarding collaboration and customer-centricity. It’s also essential to celebrate small wins and share success stories to build momentum and buy-in across the organization.
Fintech companies, despite their agility and digital savvy, also face challenges, including increased regulatory scrutiny and fewer offerings compared to traditional banks. Ultimately, adapting to the changing landscape with these strategies in mind is achievable. A fundamental shift in mindset from retail banks to view change not as a threat, but as an opportunity to better serve their customers and unlock new growth opportunities, is key. The future belongs to the banks that are willing to embrace change and evolve in the face of this disruption.
Editor’s note: This article was prepared with AI language software and edited for clarity and accuracy by The Financial Brand editorial team.