“The moment you say you’re a fast follower, what you’re really saying is you plan to be behind.” -Joel Swanson
Fintechs are a risk that many financial brands won't take. They are comfortable staying in the Cave of Complacency where it familiar and safe. But many fintechs are actually looking to partner with community banks and other financial brands to create new opportunities and provide better experiences and services. So while this collaboration may seem risky, the reward is cutting-edge technology that will differentiate your brand.
Joel Swanson, Chief Member Experience Officer at VyStar Credit Union joined the Banking on Digital Growth Podcast to discuss the necessary risks financial brands should be taking when it comes to fintechs. Joel is passionate about driving positive change and having a real impact on the lives of those he serves.
Taking Necessary Risks to Grow
In this ever-changing world, it is essential for businesses to find new and creative ways to stand out among their competitors. If brands are always doing the same thing over and over again, they are never going to affect real change. And in order to change and grow your business, you have to be willing to take risks.
However, it’s important to distinguish between a general risk and a necessary risk. Every decision that a company makes comes with some sort of risk. It’s just a matter of distinguishing between the ones that are worth it and the ones that aren’t.
In regards to financial institutions and their digital growth journey, there are some necessary risks that they need to be more willing to take if they don’t want to become obsolete. And adopting digital strategies and partnering with other brands that can better assist you in those efforts to provide something new and innovative is necessary.
Financial brands need to start thinking less about what could go wrong and more about what could go right. If you’re too stuck in the past because of your fear of the new and the unknown, you will eventually fall behind. Brands need to start thinking more about what they can do to stay relevant and compete.
Financial Brands: Where They Were, Where They Are, and Where They’re Going
To better understand why certain risks are necessary, such as partnering with fintechs, it’s helpful to take a look at where financial brands used to be versus where they are today.
Take Vystar as an example. Joel mentions that just four years ago when he came into his role as Chief Digital Officer, he recognized that something needed to change. There was a need for something, but he wasn’t exactly sure what it was.
Many other banks and financial brands were in this same situation. They knew that technology was the future. There was no denying that a transition to digital was happening, but what could they do to better handle this? They needed a way to simplify the technology that did exist.
Every bank was doing the same thing; they were trying to take this technology and piece it together to create something new and different, and everyone had their own version or way of doing things. And while it’s good to try to stand out and be a leader for change, no one was really taking the necessary risks. Every brand was just sort of fumbling around trying to figure out how to make it work and that disjointed internal experience created a disjointed external experience for the customer.
Suddenly, it was like there were 27 different ways of doing things—27 different ways that a customer could interact with a brand digitally. But that also meant that employees had 27 different systems to manage. And the stress of that meant a lot of mistakes were being made.
One wrong move, and everything could fall apart.
So eventually, there was this realization of needing a simpler way of doing things. The technology wasn’t going anywhere, so they knew they needed to find a better way to make it work. But how?
Joel said that for him, it was a matter of recognizing that perhaps it was less about everyone trying to do their own thing and be unique and more about working together to find one ecosystem. One way of making all the technology work together in a more uniform way is to simplify the system. And Joel’s hypothesis was to find a “bank in a box”—a brand that had created a digital banking system from the ground up.
Once you figure out a system that works universally for everyone and is more efficient, you can start branching out and finding ways to provide unique offerings.
Everyone has digital now, so you’re no longer special just because you’ve got these fancy automated systems. So once again, it’s about looking for those vendors that have been doing things differently all along and partnering with them to create something new and exciting.
But brands are afraid to take that risk. Fintechs are a risk, there is no denying that, and no one wants to be the first one to take that dive, but you have to. It’s necessary if brands want to experience growth and get ahead.
The alternative is becoming obsolete.
Financial brands need to take a closer look at these fintechs and banking as a service (BaaS) brands and think about the ways they can partner and collaborate with them to come up with something new and innovative. These are the necessary risks that are worth taking because these digital brands can offer cutting-edge tech that can take your company to the next level.
Better Experiences = Better Banking
The important thing to remember when trying something new and taking risks is that digital growth is a journey.
Brands don’t have to do everything all at once. In fact, it’s better to take it one step at a time and focus on the experiences along the way. If you try to rush through it and glaze over the experiences, it likely won’t work out.
The experiences of the customer and the employee are essential for digital growth. When everything starts becoming automated and digital, it’s even more important to take the time to ensure your employees and your customers are still having their needs met.
There is this assumption that because digital makes things easier, more convenient, and efficient, the experience is automatically better. But it’s easy to lose sight of the customer as a human person with unique needs when you aren’t having as many face-to-face interactions with them.
Similarly, just because some tasks are now easier with digital doesn’t mean the employee experience is automatically easier and better. It’s important for brands to continue providing a healthy and positive company culture to ensure their employees are satisfied. Because the employee experience ultimately determines the customer experience.
It’s all about putting purpose at the center of your thinking. A major component of the digital growth journey and methodology is having a people-focused purpose that keeps you moving forward. Think of people like the north star. This is your guiding principle and what keeps you aligned and on the right path while you navigate digital challenges.
The ultimate goal is to be more efficient through better digital delivery and service options, but what drives this should be the desire to create better experiences. This is how you experience growth and scale your business and take it to the next level. It’s a combination of better technology and services combined with a human element that uplifts the human experience.
Digital Strategy and Fintech Collaboration
Another key element in the digital growth journey is collaboration. Growth is a journey from good to great, but brands can’t do that alone. Attempting to take an individualist approach with result in struggles along the way. If you want to be innovative and have a positive impact, you have to be willing to take risks and partner with vendors that can provide you with the technology to make this happen.
Partnerships and collaboration are an essential part of the digital strategy.
Change is necessary to make things happen. And in regards to financial brands and digital growth, this means being willing to connect with digital partners—with fintechs. Digital growth is a team effort.
Of course, not all fintechs are the same. It’s important to distinguish, as Joel puts it, between the fintechs that want to eat your lunch and the fintechs that want to have lunch with you. You want to find the partners that want to have lunch with you, the ones that are excited to sit down and have a conversation about what is possible if you put your heads together.
Community banks and credit unions cannot compete with fintech innovation because they have a fiduciary responsibility to maintain a positive net worth for their members. So they can’t do what fintech startups do, which is to raise capital and have negative earnings for years to invest in new products and technologies.
However, that innovation and those technologies are essential for growth. So, no, they can’t compete with fintechs, but they can partner with them. That is the only way to gain access to these cutting-edge technologies.
The question is, how do they do that? How do you find the right fintechs to partner with?
And the answer is investment—and that’s where the risk comes in. There are always business risks when you are trying something new, and in this case, investing in fintechs is a necessary risk.
Unfortunately, this is the thing that so many banks have been scared to do. They think it’s too much of a risk, which has created this feud between banks and fintechs. But if they could just find a way to sit down with them and invest in the right ones and move beyond this fear of the unknown, it would help everyone and would be better overall for the entire financial industry.
Fintechs offer a new perspective. They can really transform the way banks think, and when you see things differently, it drives new behaviors and new opportunities. It helps you create new habits that ultimately help you transform your company and carry it into the future.
How to Overcome Roadblocks and Facilitate Change
Part of accepting that these partnerships are necessary is understanding your situation and recognizing that you have a problem. And this goes back to focusing on the customer and providing better services, better solutions, and better experiences.
A lot of the problems that many banks are facing on their digital journey is that they just can’t do what they need to in order to meet the complex demands of today’s consumers. But fintechs can. So it’s about acknowledging the problems and realizing that the solution is to work together with fintechs to find better solutions.
And this once again takes you back to that notion of the fear of the unknown.
Financial brands are afraid to take that leap and be the first one to take the risk, but someone has to. They justify avoiding these risks initially by saying they are “fast followers.” But when you say this, what you’re really saying is that you are willing to be left behind, because that is what will happen. If you are always following others who take the risks first, you’re always going to be one step behind, which means you’re not going to be able to compete.
If you can’t compete and you aren’t willing to be a leader for change, you will become obsolete. It’s a scary thing to face, but community banks and credit unions have to be willing to step forward and collaborate with these digital vendors and take these risks if they want to succeed and continue on their digital journey.
The first step to getting over that fear is to understand these fintechs. Financial brands say they’ve looked into them, and they know what they’re all about, but this is always done from an outside perspective. They never actually opened an account with them or applied for a loan with them, and so everything they are afraid of comes from this place of not truly knowing.
You have to pick up your phone and go through the experience yourself to fully understand what these digital vendors are all about. This is the only way to get past that fear and those roadblocks that are stopping you from taking the leap.
The Digital Journey Is a Process
Being a leader takes courage. To move forward on your journey, you’ve got to be willing to take the necessary risks. But you’ve also got to remember to take it one step at a time. Be willing to commit and take the steps to make these changes, but it’s important to enjoy the journey and the process. If you rush through it, you can easily fall off track and lose focus.
It’s all about staying aligned, focusing on that “north star,” and avoiding getting caught up in what’s behind you. If you always look back and think about what went wrong or what you could have done differently, you may find yourself constantly trying to start all over again, which will never get you anywhere.
Learn from each stage of the process and build on that, don’t try to go backward. The digital journey is not a sprint, it’s a marathon. So pace yourself and keep looking ahead. Mistakes will be made but that’s part of the growth journey.
Learn from them and move on.
This article was originally published on March 17, 2022. All content © 2023 by Digital Growth Institute and may not be reproduced by any means without permission.