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The Future of FinTech: Building the Bank of the Future


Highlights and insights from the Future of FinTech event in New York by Kristen Lunman, Innovation Director, Kiwi Wealth


In June, I attended the Future of FinTech conference in New York City, where global FinTechs and traditional financial services firms alike took the stage to discuss the changing face of financial services. I’ve always been passionate about the future of finance, and being there confirmed my theory –  FinTechs still believe they can disrupt incumbents by improving everything from investing and lending, to insurance and financial advice.

Fresh as FinTech

In many ways, the FinTech industry is becoming the fresh new face of financial services. It’s increasingly clear that FinTechs no longer stand apart from mainstream financial services, but are in fact becoming an integral part of the financial system. And as they gain traction and build their influence amongst consumers, they’re having a dramatic effect on incumbents like banks, insurers, and wealth managers; pushing them to react and respond to stay relevant.

We all know that banking hasn’t changed much in a long time. The biggest criticism voiced last week at the conference is the banks’ reliance on outdated business models that are based on hidden fees, unfair advantages, and not doing what’s best for their customers. The new alternatives believe they are shining a light on just how bad banking-as-usual has become.


Say hello to the new digital customer

The new generation of consumer is mobile first, continuously connected, and demands transparency, delightful user experiences, and ease of use. These customers are on to it. They’re loyal to the brands that they trust. Smart financial incumbents are paying attention; they understand that it is precisely this trust that underpins the success of all global brands. So they’re all furiously building (or trying to repair) critical consumer relationships, by focusing on trust, transparency, and honesty.

The new generation is tech-savvy. But they still feel out of touch and out of control when it comes to their finances. They want to feel empowered. They want to interact with money on their own terms and they know this is near impossible in the current financial system. Instead of turning to banks for help, they’re turning to FinTechs who they see as “partners” that will join them on their financial journey, helping them along the way, and guiding them to live life to the fullest while also planning and preparing for the future.


Unfair advantage. True or False?

FinTechs feel they have the answers that customers want, and the agile culture needed to create a new financial landscape. They also believe they don’t have to contend with legacy systems. It’s quite a bold mindset, isn’t it? But this confidence isn’t out of line. Outdated technology, a large employee count, and a struggle to attract tech talent can hamper innovation efforts for financial incumbents. FinTechs are also better leveraging data to be helpful and insightful, offering a frictionless customer experience by understanding their customers on a granular level.

Robinhood co-CEO Vlad Tenev was frank about his lack of concern with traditional brokerages, like Charles Schwab, lowering fees and developing mobile technology to compete for millennial investments. Why? Because they weren’t really ‘technology or engineering companies’.

And when it comes to the cost of acquiring customers, FinTechs enjoy valuable (and cheaper) word of mouth referrals from delighted customers. People talk. Word gets around. Here’s some proof: Wealthfront CEO Andy Rachleff used his time on stage to boast of his firm’s leanness and growth, noting that they enjoy a 90% gross margin without spending a cent on advertising.

Maybe these new players can’t yet match the number of customers, assets under management, or revenue figures of the firms they’re challenging, but their rate of customer adoption beats traditional financial services firms. Wealthfront went from $0 to 10 billion in assets under management in five years. Robinhood now has more than 4 million customer investment accounts, compared to Charles Schwab’s 11 million and E*Trade’s 3.6 million. And they’re only three years old.


Plan of attack

There are five things that people do with their money: pay, spend, save, invest, and plan. FinTechs are winning over the next generation of customers by focusing on one of these segments at a time; constructing and delivering a superior experience that is fast, easy, accessible, and affordable.

Over the week, what was particularly interesting to note about FinTechs, is that they often start out in one area (Betterment: plan and invest, Robinhood: invest), but they all have visions of transforming the financial lives of customers, by building the future bank around them. By implementing a wedge strategy, and grabbing market share at the edges, they establish a loyal customer base critical for future growth.

Wealthfront’s Rachleff spoke publicly for the first time about his company’s ambitious plan to evolve from planning and investing to providing a central financial hub for its clients. “Our vision is to deliver a service where you direct deposit your paycheck and we automatically pay your bills, automatically top off the emergency funds, and then route money to any investing platforms that meet your goals”, he said.

Affirm CEO Max Levchin, who co-founded Paypal, is now trying to build what he calls the first modern bank for a younger demographic, starting with point-of-sale loans. And look at the latest product from SoFi, which CEO Anthony Noto described as a “high-interest deposit account”, which also lets customers make payments, deposit checks, transfer funds, and withdraw money from ATMs. In other words, this FinTech company is launching an online bank. They’re not the only ones. Robinhood has recently raised $363 million to roll-out a new product suite to become a full-platform financial services company, aka, a bank.


Ignore at your peril

So one of the many things I learned in NYC is that while the entry point for FinTechs is relatively niche, their end goal is world domination. These FinTechs have bold dreams of building delightful banks that solve problems for the digital generation. But what does this future bank look like exactly?

This bank of the future is a customer-centric bank. A bank that understands their customer at an intimate, individual level. The bank of the future will give its customers insights into their spending and financial behaviours, and help people like you and me figure out how we should and can build our financial futures. We’ll be transformed from passive participants of our finances to being active players in full control.

And yet, many firms operating in the highly-regulated financial industry still shrug off these emerging FinTechs; convincing themselves they’re protected from the same forces that have changed retail, entertainment, and transportation. Firms do so at their own peril, CB Insights CEO Anand Sanwal said – Apple, Netflix, and Uber aren’t going anywhere anytime soon.

Sanwal also said that FinTech growth is only going to accelerate from here, and disruption that was gradual, will soon become sudden. “Don’t miss the upstarts. Acknowledge their existence,” he said, recommending that financial services firms look outside their own company for innovation. Because the opportunity to serve tomorrow’s customer rests with the innovators.


To find out more, check out the highlights from CB Insights Future of FinTech Conference NYC.

Kristen Lunman, Innovation Director, Kiwi Wealth


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