By W.B. King
Fintech Connect North America’s 2021 Conference brought together more than 2,500 attendees from 50-plus countries. The two-day virtual event featured 200 speakers and countless sessions all of which focused on the critical issues facing the financial services industry that is slowing emerging from pandemic woes.
“When I was putting together this panel, I wanted to identify key leaders in their field from different parts of the fintech ecosystem,” said Fintech Connect’s Senior Content Director Lawrence Coldicott when introducing panelists for the keynote discussion: “2008 versus 2021- How can FinTech Drive an Innovative Recovery?”
Session moderator Annete Brolos kicked off the conversation by asking the panelists how the fallout from the pandemic differs from the Great Recession that began in 2008.
Barclays' CEO of Consumer Banking and Payments Ashok Vaswani said these events are quite different. He noted that recessions are usually created because of a buildup of certain asset classes, such as mortgages that went off the rails in 2008 and 2009. The pandemic, he said, has been more a “medical issue” that “literally froze” the entire planet.
“The other difference is the speed at which governments moved, which was just amazing,” said Vaswani. “I think they learned significantly from the financial crisis of 2008 and pumped tremendous amounts of liquidity into the system…in some cases equal to 15 to 20 percent of the GDP of the country. It’s unprecedented support.”
These noted government bailouts led to consumers having cash on hand. And in Vaswani’s view, consumers by and large comported themselves pragmatically. As a result, consumer and bank balance sheets have dropped dramatically and consumer spending is on the rise, he said.
The Tech Difference
Michael Haney, head of Digital Core for the Miami, Fla. –based Technisys, a digital banking firm, said a key technology difference between the Great Recession and the pandemic is how consumers interfaced with their financial institution.
“Consumers, through no choice of their own, had to dramatically change the way they engaged their bank and conducted their personal finances,” said Haney. “We saw dramatic decreases in branch usage and increases in digital ways to engage their bank even in segments that traditionally weren’t adopting a lot of digital tools.”
MSU Federal Credit Union’s Assistant Vice President of Digital Strategy and Innovation Benjamin Maxim said the credit union’s balance sheet grew considerably during the pandemic due, in part, to stimulus checks. And he added that members who were once apprehensive about using digital banking tools have warmed to the notion.
“People are holding on to money and paying down debts,” said Maxim. “And all the people who were unwilling to try our digital channels previously tried them and have continued using them. We also saw our chat volume go up 130 percent month-over-month.”
The panel agreed that while circumstances have improved greatly across the boards since June 2020, emerging COVID-19 variants are a reminder that the pandemic is not over. Additionally, unemployment and inflation rates remain high, which is disconcerting.
Moving forward, Chime’s Vice President of Lending and Product Strategy Aaron Plante said innovation must play a key role in addressing the needs of consumers across all income levels. The San Francisco –based Chime provides fee-free mobile banking services provided and owned by The Bancorp Bank or Central National Bank.
Plante noted that using technology to streamline financial interactions has long been Chime’s focus. The pandemic, he added, underscored the need for this type of approach.
“When we think about the recovery, what you are seeing across different consumer segments within the U.S. is quite different. The folks that were on the front lines 10 months ago are understandably reluctant to get back to work right away,” said Plante. “Those who haven’t been able to work remotely are still struggling. Where companies like ours can help is by providing solutions that are easy — more virtual and accessible for people across the spectrum.”
Winning Fintech Models
Daniel Eberhard, CEO and founder of Koho Financial, said his model for consumer fintechs falls into three dimensions: speed, access and yield. The Toronto –based Koho provides banking services in partnership with Peoples Trust through a mobile app and prepaid Visa card.
Eberhard explained that in his view fintechs that focus on the “average needs” of consumers will continually gain the most market share.
“It’s really easy to forget — and we try and build this into our DNA at Koho — most folks who use fintech products are everyday people who are not living in these bubbles of tech progressiveness that we do,” said Eberhard. “The fintechs that remember that are the ones that do well in all environments.”
Maxim agreed with Eberhard adding that MSU Federal Credit Union has been partnering with like-minded fintechs during this recovery period, especially companies focused on financial wellness and literacy.
“Credit unions are very collaborative and we are trying to bring that to fintech partnerships as well to create a better industry and experience for our members and the people in our communities,” he said.
Technisys’ Haney built on Maxim’s premise adding that in the wake of the pandemic it is challenger banks and fintechs that are accelerating change in the financial services industry. This acceleration, he said, is rooted in education, advice and guidance that offer actionable insights.
“This will allow banks to figure out how to target those segments that have been traditionally underserved, which have allowed some of the challenger banks to fill in those niches that the traditional banks were ignoring — perhaps because they were too product siloed and not enough customer-centric,” he said.
To achieve the aforementioned objectives, Haney said the focus should be on technologies that lower the cost per account to serve a customer, increase the customer experience and provide memorable journeys that make customers loyal to their financial institution.
“Efficiency and productivity — those metrics will always be there, but to really achieve that financial health with actionable insights will be all about the rich set of data that banks have,” he said. “We always heard that ‘data is the new oil’ and that will continue to be true.”
Digital Banking is Changing the Workday
If the pandemic taught only one lesson to the financial industry, Barclays’ Vaswani said it's that digital banking is here to stay; but there are, of course, many other lessons gleaned. A traditional construct like working Monday to Friday in the office is also over, he added.
“I was someone who never ever worked from home, but even to a diehard office guy like me it makes sense — maybe working two days from home,” he noted.
Maxim said that MSU Federal Credit Union’s employees have returned to the office, but it has been fluid and subject to change. There are also different requirements for in-branch staff and back office employees. With many of the latter still working from home, Maxim said the credit union is learning to find the right balance.
“All our locations are in Michigan and now we are having employees that don’t live in Michigan, so that’s a new experience for us,” he said. “It will change how we work for the better as it gives us access to more talent and I think that is good for the industry as a whole.”
While Haney said that the need for in-person, human contact will continue to be a factor in the financial services industry, the pandemic has provided an advantage to employees.
“This is all about talent and talent attraction. And I think employees have never been more empowered than right now in choosing the flexibility of when, where and how they work,” said Haney. “I think that companies will have no choice but to accept that and cater to that. And I think it will end up being a nice, healthy balance somewhere in the middle of these two extremes we have seen over the last couple of years.”
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