With the pace of innovation changing so quickly in our industry, understanding competitive threats is more crucial than ever. As more FinTech firms compete for share-of-wallet every day, which ones should be on your radar? And how can your community financial institution play to your strengths and stand out?
Kasasa’s Chief Innovation Officer, John Waupsh, wrote a blog post for The Financial Brand about FinTech firms that community financial institutions need to watch out for. When he wrote it, there were over 12,000 FinTech startups spanning 18 different areas of banking and $22 billion dollars was invested into FinTech companies that year. In 2018, that number rose to $38 billion. We took another look at John’s blog to see how you can compete with FinTech in 2019.
Evaluate your strengths, weaknesses, opportunities, and threats.
The process for starting strategic planning at your institution stays mostly the same. Start with a SWOT analysis to determine your institution's strengths and weaknesses. Here are the questions you should be discussing with the leadership team at your institution:
- What is your primary area of focus (mortgage lending, commercial lending, retail banking, small business banking, etc.)?
- Who is your target audience in that primary area of focus? How big is that audience? How much accurate data do you have to understand that audience?
- What are the limits of the existing acquisition capability (geographical, self-imposed, employer group, other charter limitations, etc.)?
- What tactics have you used to get your target audience’s attention in the past, and how successful have these efforts been?
- Which FinTech firms are currently competing for business in your primary areas of focus?
- What appeals to your target audience about today’s FinTech terms?
- How well positioned are you to defend against the competing firm’s strengths?
When you’re answering those questions, it becomes even more clear that FinTech isn’t slowing down any time soon. Trying to narrow it down to the one FinTech firm you need to worry about is impossible and it puts your institution at a disadvantage. You’ll become focused on external influences that are beyond your control. And even if you did narrow it down to one or two companies that might be a threat, every FinTech startup has about 30 similar businesses that provide a similar solution. For example, in lending, you’ve got Avant, Prosper, Affirm, SoFi, LendingClub, Kabbage, and more.
Now, take a closer look at how you answered the questions above. You might notice that a lot of your responses focus on digital media, advanced data, innovative products, ease-of-use, and modern design. These are typical advantages that these new FinTech firms have over legacy organizations like your community financial institution, but they aren’t factors that are out of your control.
Change your frame of mind.
Ask yourself another question: “What can we do today to make sure we continue to grow over the next three, five, or ten years?” This allows you to reposition your strategic planning team to effectively brainstorm solutions to tackle problems within your community financial institution’s control. Here are some more broad questions that should be considered:
- What can we do to scale? From compliance workflow automation to data-driven marketing delivery to brand recognition, spend time focusing on ways to invest in effective solutions that outside technologies and vendors can offer.
- Which target audience(s) should we focus on? While this doesn’t mean ignoring existing segments, it does mean that you should utilize data to look at your segmentation and decide to stop investing in unimportant segments.
- Which products or services should we stop offering? This is a forward-thinking statement and requires you to spend some time thinking about where you will go, which services you’ll cut, and what will really drive future growth.
- Are the right leaders and processes in place? An institution like yours will undergo extraordinary change management challenges over the next several years. To succeed, organizations in transition will need a strong team to help navigate those waters.
- How do I prepare my team for a future of change? The earlier you can get excited about the future, the better off you will be. And we’ve seen that successful change management starts at the top with your organization’s leaders. Your behaviors will influence your team’s attitude and performance.
- What new skills should be brought in-house? Which can be managed by best-in-class vendors? Odds are that you won’t directly employ data scientists, but you can rely on vendors in the industry that have the expertise in data, products, and marketing technology.
And this piece of advice from John’s 2016 blog still resonates three years later: Like most things in life, flipping the problem just a bit can dramatically improve how we look at solving it. The question is whether you’re up for the challenges (and opportunities) that digital delivery, new technology, new expectations, and new competitors provide.