"For intermediaries, the new-found and lasting reliance on technology will pose further questions over how they deliver value as people adapt to the “new normal”."
Simply put, the lockdown further accelerated the need for technology. This is because it brought about an interesting, challenging situation: on the one hand, millions of consumers and businesses were put under significant financial distress; yet at the same time, bank branches and offices were closed, while waiting times at call centres lengthened notably, meaning the regular avenues many people relied upon for seeking financial support were cut off from them.
Technology has been – and continues to be – the answer. Before the pandemic took hold, people’s interaction with fintech largely involved using online and mobile banking platforms to check their accounts and transfer money. Now, though, fintech has become integral for those looking to take out financial products, open new accounts and receive financial advice.
For some financial services firms, this has not been an easy transition. Their data, systems and processes are completely reliant on legacy technologies and on-premise servers; as such, delivering new products or enhanced services to their customers at a time when employees cannot be in an office or branch has become more difficult.
For intermediaries, the new-found and lasting reliance on technology will pose further questions over how they deliver value as people adapt to the “new normal”.
The role of the intermediary is changing
As consumers and businesses embrace the fact that financial services are being delivered digitally, intermediaries like brokers and advisers must similarly come to terms with how they can operate effectively.
Let us take a mortgage broker as an example. Typically, they would have received an enquiry from a prospective borrower and, having assessed his or her requirements, the broker would have sourced suitable products from various lenders – perhaps based on preferred relationships.
This crisis will change the modus operandi. Lenders will need to move to take advantage of cloud native technologies, if they have not already done so, to be prepared for the next crisis. This will allow for manual steps to be removed from complex applications, onboarding and completion processes that almost everyone has experienced when opening a bank account, taking out a credit card or getting a loan of some description.
In the case of mortgage brokerages, there will therefore naturally be a shift towards marketplace consolidation based on who can provide the most volume (to the lender) and transparency (to the borrower) – a story that has played out in other sectors.
A similar argument can be made for payments, for instance. Where businesses or individuals need to make large, over-limit payments they would expect a fully digital service rather than needing to travel to a bank branch with ID or wait in extended call centre queues. The “intermediary” here would be a bank, rather than brokers. The nature of financial services is that everyone, at some point can play an intermediary role.
So, what can be done, and is fintech going to be the difference?
How fintech can help
Most fintech firms are focussed on solving one problem well, no matter how big that problem is.
Identity verification, alternative credit scoring, AI assisted chatbots and recommendation algorithms, next generation core banking, transaction classification, and simplification of mortgage chains – these are all areas that have deep, niche challenges to solve. None of these technologies in isolation solve an end-customer need, but it is fairly clear that they each form part of a value chain that is all about getting customers access to credit.
Companies that focus on utilising best-in-class providers in their value chain in order to build a truly exceptional service offering have a better chance of succeeding. There are, for example, some credit marketplaces in the UK which already offer pre-approved loans that can be opened in just a few minutes with minimal clicks; this is all thanks to progressive technology choices from the lenders.
Established technology best practices have already been applied to support millions of banking customers, as well as for processing large datasets and enabling open interoperability between systems run by different companies. Indeed, the most successful finance companies are those that have formed partnerships to create technology that can be used seamlessly between separate banking products and accounts.
Intermediaries must readily embrace this change; they must seek ways to use technologies themselves in the way they communicate with and present products to clients. Failure to do so will result in them getting left behind as consumers begin to rely almost exclusively on digital solutions for financial services.
The fintech revolution is only just beginning
Ultimately, any individual or business involved in the financial services industry must already be alert to the benefits that technology can provide. Those who do not may find themselves cut adrift from their clients and competitors.
There has been talk of ‘a fintech revolution’ for over ten years now. It promised open access to data, hassle-free banking experiences and a fairer deal for consumers. In truth, despite considerable attention and investment, what we had previously witnessed was really only a cautious adoption of financial technology, with consumers, regulators and established banks taking their time to become familiar with what it can enable.
The pandemic, and more specifically the lockdown introduced in late March, catalysed further advance in the fintech space. Even as social distancing measures are lifted, do not expect customers to tolerate long queues or phone calls – people are ready to rely on technology, so intermediaries must be too.
