This is a reprint of a feature that originally ran in the PYMTS.com Q4 Executive Report: IN A WORD: 50 Payments Execs Sum Up 2021 on December 30, 2021.
Coming out of last year’s forced and rapid adaptation to a digital-first marketplace, this past year challenged financial institutions to truly understand what is most important and valuable to their customers and, in turn, to deliver meaningful and differentiated offerings.
So, in a word, 2021 was all about relevance.
Simply said. Much more complex to achieve.
Maintaining relevance in today’s increasingly crowded financial services ecosystem requires having the right technology, the right partner and the right solutions to not just meet customer expectations, but to anticipate them — because the competition from non-bank financial players is only a click away. In order to compete, financial institutions sought to incorporate FinTech functionalities directly into their own offerings. This required taking stock of all that has changed, evaluating their technology, products and operating models and making sure they’re hitting the mark.
For consumer banks, this meant coming to terms with the shortcomings of inefficient, inflexible legacy infrastructure and novice internal information technology (IT) teams, which prohibit the timely innovation and implementation of new customer offerings. For niche financial service providers, like mortgage lenders, it also meant realizing that you simply can’t be in business anymore with just one product.
As a result, this past year saw financial institutions pivoting away from the build versus buy mindset and embracing strategic partnerships with FinTech providers to accelerate speed-to-market with differentiated consumer-centric features — while also maintaining the confidence and convenience associated with a trusted financial institution.
But to be clear, I’m not talking about the traditional all-or-nothing relationship with a technology provider. Rather, financial institutions began seeking out flexible and modular solutions that allow them to bolster their existing technology investments and fill in the gaps, not replace them. This new approach to seeking a technology partner, not just a vendor, is what enables organizations to evolve their offerings as the market matures, adding or subtracting features as necessary, even scrapping them if they are no longer relevant — which is key to fostering the type of long-term loyalty that leads to high customer lifetime values.
Yet remaining relevant isn’t just critical to consumer-facing organizations. It’s equally important to the financial players on the back end. Take core providers, for example. To help FIs meet the ever-evolving demands of today’s digital-first customers, legacy infrastructure isn’t going to cut it. To compete with cloud-native competitors that are increasingly attracting their customers, legacy players are partnering with FinTech providers to seamlessly deliver a wider range of banking options. By expanding their value beyond record-keeping, core providers are better positioned to capitalize on one relationship with more relevant end-to-end solutions.
As we head into 2022, I think we’ll continue to see more and more FIs across the spectrum embracing FinTech partnerships to enhance their capabilities, their offerings and their relationships with customers and partners. Because ultimately, it’s more than just a means to stay relevant — it’s a way to control their destiny.