How fintech friendly is your bank?
Most people think about financial services provided by fintechs versus banks as distinct and separate from each other. But today, banks and fintechs are becoming inextricably linked. A recent survey conducted by Plaid indicated that over 70% of consumer respondents expect to get their financial services needs from both banks and fintechs.
In today’s world, digital friendliness has an expanded meaning when choosing your bank or credit card. Increasingly, consumers are voting with their thumbs, demanding that their financial data works seamlessly with thousands of external apps that specialize in key areas, like payments (Venmo, Square Cash, Apple Pay, Google Pay), personal financial management (Clarity Money, Mint, Cleo), investing (Robinhood, Coinbase), expense helpers (Trim, TrueBill), savings tools (Acorns, Digit), hourly worker helpers (Earnin, Even, PayActiv), and more. Not surprisingly, given the 10,000+ banks in the United States and Canada, a broad spectrum of bank responses to the outside financial technology (fintech) ecosystem have emerged: full embrace, reluctant support, and sometimes defensive denial.
The over 100 million digitally-savvy consumers that use fintech services (a population that grows by the day), should ensure that the banks and cards they choose meet their digital requirements. There are seven key factors that come into play when considering how fintech friendly a financial institution is:
- Getting your data from A to B (portability): Consumers can only use and rely on financial applications if their bank allows them to connect to the fintech ecosystem (see box). That connection offers them a safe way to share and permission their financial data. A broad array of financial apps use this data to deliver functionality on which consumers and businesses depend on a daily basis.
Customers banking with the most fintech friendly banks can reliably connect those services. On the other end of the spectrum, financial institutions can override consumers’ wishes to connect their accounts, potentially denying critical services to their own customers. Portability is critical so that a consumer can control their own financial data and use the tools and services that are best suited to help with their financial life.
- Don’t run the gauntlet (user experience): Fintech friendly banks effectively balance user experiences with clear consent. The act of granting consent shouldn’t be a confusing gauntlet of permissioning screens that inadvertently cause a consumer to give up in exasperation. Fintech friendly banks work to minimize friction while enabling transparent consent and a safe connection. Extra unnecessary steps, asking users to keep clicking , read unnecessary text, and close out of pop up windows, add considerable friction to the user flow.
- Practically protect me (security): Sensible security is the name of the game in digital financial services. A consumer’s financial data needs protection, but creating too many barriers can create a friction-filled and exhausting user experience. An example of this is multi-factor authentication (MFA), where the best practice is to always introduce an MFA challenge for first-time users connecting to an account. However, we see poor results when a MFA is triggered on every visit and usability suffers, or when no MFA challenge is triggered, security then suffers.
- Your data, your pick (parity): When you want to use a fintech service, you’ll need to bring the right financial data with you. The most fintech friendly banks ensure that any data you see in your account is also the data that’s made available to outside services of your choosing. However, in some circumstances banks only enable consumers to bring certain parts of their own personal data. A consumer can get around these limitations (such as printing their statements, or copy and pasting non-permissioned data) but these workarounds can place additional strain on the consumer.
- Time is money (latency): Fintech friendly banks know that quick is a baseline, not a benefit. Modern, purpose-built bank systems can connect a user flawlessly in a matter of seconds, not minutes. For good reason, as user flows break after as little as 10 seconds and users expect to spend less than 60 seconds completing simple tasks. However, many digital experiences still make consumers routinely experience wait times that are several minutes long.
- Open for business? (uptime): Need to do your expenses, manage payroll, or take out an emergency advance instead of a usurious payday loan? Sorry, not available if your bank isn’t “on”! The promise of digital banking services is 24x365 access. The most fintech friendly banks are proactively making sure that no matter what time a customer needs their data for outside services, it’s available.
- Fresh data, fresh you (data refresh): When consumers are looking to manage their money, cut down bills, or avoid fees, they need up-to-date data. “Vintage” data is often useless, as it doesn’t offer a real-time picture of their current financial standing or available funds. Even worse? Some financial institutions only update transaction information every 24-48 hours, which can give users a stale view of their available funds.Stale data can result in overdraft fees or unbalanced budgets. Fintech friendly banks understand that consumers rely on apps just as they do with their bank accounts, They will update transactions in real time, and give consumers the complete visibility and control of their financial life.
Years ago, fintech-friendliness wasn’t a factor for consumers to consider when choosing their banking or card providers. Today, to ensure that consumers can access the apps they want, decisions are made much more carefully.