Freshly emerging from lockdowns, the world is slowly coming to terms with the economic downturn the coronavirus outbreak has brought about – one that, the IMF predicts, will be the worst since the Great Depression. And one that we still have more questions than answers about. Are traditional banks digitally ready, neobanks versatile and fintechs profitable enough to survive the initial shock? If not, just how fast can they rise to the challenge, if at all?
During last week’s online panel discussion, we asked five industry heavyweights to share their two cents about the most pressing issues next-gen financial service providers face in the wake of the coronavirus crisis. Among talks of drying up funds and risk management challenges, a simple yet far-reaching question came up.
“It’s a very human thing that in the face of uncertainty, most people stick to what’s safe and familiar,” Moneyou’s Menno van Leeuwen said. “But familiar ground doesn’t have to be traditional institutions.” So with flight-to-safety instincts kicking in, the key question becomes: what does safety mean to customers? Or, to be more precise, what does safety mean to them now?
For younger people, familiar ground can also mean brands that appeal to them and this can be a huge advantage for challenger banksMenno van Leeuwen, Head of lower financial stress at Moneyou
“For younger people, familiar ground can also mean brands that appeal to them and this can be a huge advantage for challenger banks,” Menno pointed out. The others agreed. According to Fincog founder Jeroen de Bel: “Whenever a financial shock hits, it spurs a risk-off mood. Ten years ago, most people sought safety with traditional banks. But what’s a trusted brand or company now? Is it something that’s traditional or something that you interact with every single day and knows you well?” Kevin Albrecht, co-founder and CEO of Swedish neobank P.F.C, reckons generational gaps might be at play, too. “We have to think about how different generations define safety. If you’re older, it might mean something that you’ve known for your whole life. But if you’re under 40 – and a lot of fintechs and neobanks appeal to that age group – it might mean a company you can communicate easily with.”
If the latter is the case, financial service providers where customers’ needs are at the core of business are bound to be in pole position. Alfonso Sainz de Baranda, Chief Growth Officer at “financial products supermarket” Bnext, said: “We’re about to launch our own loan application system but we’re not planning to make a lot of money on loans. What we want is to give customers the opportunity to get financing from someone who knows and understands their needs and can offer them the best rates available.” He admitted it was a risky move but also a necessary one. “This is what people need right now: incentives to spend more and money to make up for their lost income.”
This is what people need right now: incentives to spend more and money to make up for their lost income.Alfonso Sainz de Baranda, Chief Growth Officer at Bnext
But before placing our bets on who will come out as a winner in the race for better tech, more sales and happier customers, there’s another question to consider. Who’s competing in this race, that is. W.UP’s Balázs Vinnai explained: ”This match is not between old players and new players. It’s about how much you focus on creating best-in-class customer experiences versus how much you cling onto legacy thinking. Incumbents who can build great digital experiences fast can still finish on the winning side.”