In the past several years, we have seen many industries that we always assumed would be the same get turned on their heads by innovative technology startups. There is a whole generation of workers now who aren’t afraid to go back to the drawing board on a product or service we’ve always accepted as only being done in a certain way. Uber took on the taxi cabs. Amazon took on brick-and-mortar stores. Spotify took on the music industry. No industry is safe from disruption.
One of the biggest battles going on right now between startups and established business is in the financial space. Long-standing giants of the American banking scene are being threatened by the little guys who have picked one specific financial service and are delivering it with excellence. The quality customer service and the ease of using these FinTech (financial technology) companies has proved effective in luring customers away from the big banks.
Simple was one of the early players on the FinTech stage, founded in 2009 as an alternative to big banks that make money off confusing their customers with complicated products. Banking should be simple, they said. And the consumers jumped at the opportunity to stop their banks from taking advantage of them. Even though it wasn’t long ago, mobile banking wasn’t pretty and it wasn’t easy in 2009. Simple offered the public a dramatically different way of handling a necessary part of life without involving big corporations. In a brilliant move, Spanish banking group BBVA saw the writing on the wall and acquired Simple into their portfolio in 2014.
Venmo challenged the antiquated process of transferring money from one bank account to another. While big banks are still using ACH processes which take days to set up even between two accounts held by the same owner, Venmo instantly transfers money from a user’s debit card or checking account to another user. The ease of Venmo (or Square Cash) leaves a huge swath of the population asking, “Why would I use an ATM to get cash to pay for half of the bill at dinner when I could do it on my phone?” Now it’s faster to put money in a friend’s checking account for a taxi ride than it is to try to move your own money between two banks. The founders behind Venmo simply found a process that the public had accepted with all of its hassles and created a better way of doing it.
Startups have already taken on the big names and aren’t even wasting their time with the small community banks. They’re a big enough threat that giants like ADP are taking startups to court. Small financial institutions should be terrified of this. As startups like Simple, Square, Venmo and Zenefits raise millions in funding and race toward market domination, the ‘comfortable’ community banks are going to be left in the dust.
Small financial institutions need to be developing mobile solutions for their customers if they hope to keep those customers in the long term. While there are still some holdouts who refuse to bank on their mobile devices and prefer to bank in-person, their breed is nearing extinction. Being small means these businesses have the advantage of being able to move far faster than the massive corporations. They could implement an entire new mobile solution in the time it takes an enterprise level bank to make the decision that it’s a good idea. They know their clients better and can easily host focus groups to test new ideas.
If these small, comfortable financial businesses aren’t willing to disrupt themselves with mobile technology, a startup somewhere will do it instead and put them out of business.
Do you have a small, comfortable financial business and need to innovate with a new mobile solution for your customers? We’re here to help. Let’s chat.