Last week at the Sundance Resort in Utah, MX held the 5th Fintech Festival, an exclusive event for the most innovative companies and thought leaders in financial services.
To launch the discussions about financial services, Don MacDonald, CMO at MX, gave a presentation about the 5th Age of Banking. He demonstrated that since the early 1800s, banking has had four major inflections points and that we’re on the cusp of the 5th: The Age of Advanced Analytics. In this age, financial institutions must learn to use analytics to better serve their account holders on the digital front. You can read a summation of MacDonald’s thoughts in this piece for The Financial Brand.
MacDonald then introduced a panel of thought leaders with specialties spanning the industry. The panel consisted of Jim Marous, Owner & Publisher of the Digital Banking Report and Co-Publisher of The Financial Brand; Steve McLaughlin, Founder & Managing Partner at FT Partners; Pete Chiccino, Executive Vice President & Chief Information Officer at Bancorp; and Seth Wheeler, Guest Scholar at Brookings.
In addition, MacDonald polled attendees in real time to get a sense for what they thought about the state of the industry. In the first question, he asked whether attendees agreed that banking is at an inflection point. Here are the results:
This poll was followed by another, this one about the biggest hurdles facing the industry today:
Jim Marous noted that although many financial institutions say that banking is at a major inflection point and that digital transformation is their biggest hurdle, they don't act in accordance with those beliefs. "Many more resources are being dedicated to regulatory and less to digital transformation," he said. "This happens despite the knowledge that digital transformation is of prime importance."
Steve McLaughlin added that consumer demand is the central drive behind both the inflection point and the digital transformation. "People aren’t going to wait for the banks," he said. "They will find someone to help them get what they want." This change indicates that financial institutions must increasingly focus on growth and relationships, priorities reflected in our question about that topic:
Seth Wheeler commented on the complementary nature of growth and relationships, saying, "We’re in an era where most of the change will be consumer and small business friendly. Institutions will be forced to compete on delightful customer experience, transparency, low fees." According to Wheeler, it's by nurturing these relationships that growth will come.
Jim Marous agreed that advocating for consumers will lead to growth, but he pointed out that the definition of advocacy is changing. "Advocacy is now being defined differently," he said. "It's no longer just about being friendly in a branch. Instead it's about knowing your account holders, looking out for them, and rewarding them. It also includes the ease of transaction and the user experience."
The attendees generally agreed that advocacy is critical going forward:
To best advocate for the end user, financial institutions must invent completely new strategies. "Throw away the old strategic plan," Pete Chiccino advised, "and stop acting like financial institutions have all along." Chiccino added that this requires "a blend of both partnering with fintech companies and knowing what you’re good at and owning that in house."
Most attendees agreed that the secret to success depends in part on partnering with fintech companies — especially when it comes to improving analytics.
Pete Chiccino said mastering analytics is pivotal to advocacy, saying, "We need to do a better job of understanding consumer data, building analytics around that, and marketing to the consumer based on what we know about them. Look at who’s hitting the market today and who’s worth billions of dollars, and it’s those companies that are best figuring out data analytics."
For example, we might look at Netflix and Uber, two companies that have mastered analytics to better serve their consumers and provide a seamless personalized experience. Panel attendees agreed that the future of banking will largely head in this direction:
Of course, there's something potentially disheartening about bankers acknowledging that the future of their industry may belong to new competitors who master analytics.
Fortunately, there's potential for financial institutions to pivot on their own terms, master analytics and advocacy, and own the future. As the panelists at the Fintech Festival outlined, it's the best hope for financial institutions going forward, and even though it requires hard work, it's certainly possible. For more on this topic and how financial institutions can keep their lead, read "The Future of Banking: Uber or Apple?"