Fintech is in the Eye of the Beholder
Finance professionals have very different perspectives
The Chart of the Week is a weekly Visual Capitalist feature on Fridays.
The development of new technology in the financial sector is happening at a breakneck speed.
Between the emergence of the blockchain, AI, robo-advisors, regtech, payment and loan services, and many other examples of technological progress, there are many ideas to keep track of at once.
It would appear that these changes are happening so fast, in fact, that people don’t even have a uniform idea of what fintech really is.
According to the results of LinkedIn’s survey of financial services professionals, how fintech is perceived greatly depends on a person’s role within the financial industry.
Wealth managers, for example, are very much aware of the robo-advisor arms race happening now, and how it may impact their future business especially with millennials. As a result, it’s likely no surprise that 68% of wealth managers rank robo-advisors as an important development within the fintech sector. Meanwhile, other developments like the blockchain (21%), regtech (24%) and digital lending (16%) are perceived as less important by this group.
For investment bankers and fintech professionals, the tables are turned.
Interestingly, these two groups seem to see more eye-to-eye regarding the technologies at play in the finance sector. Both fintech professionals (63%) and investment bankers (55%) saw AI-based investing as an important development, and both saw the blockchain (44% and 35%) as a key development as well.
Retail bankers had a very different perspective on the blockchain. They ranked both insurtech and chatbots (which we didn’t even show in our chart) as more important than the new distributed ledger technology, putting it in last place out of the options given.
This could be an oversight, considering that cryptocurrencies alone are already worth more than $80 billion, and that doesn’t even include the many other potential applications of the blockchain.
Retail bankers had other contrarian opinions as well – they were the only subgroup where the majority chose digital lending (54%) as the most important development in the industry as a whole.
Living in Alternate Realities?
While the jury is still out on what aspect of fintech will have the biggest impact on financial services overall, there is an even deeper question at hand: will fintech make a real impact on traditional financial services at all?
It’s a question that’s very divisive, with very different answers depending on your side of the spectrum:
- 42% of fintech professionals see fintech as being a direct threat to traditional finance
- 13% of traditional finance professionals see fintech as being a direct threat to traditional finance
Who’s right, and who’s wrong?
Surely, at least one group is going to end up disappointed with their lack of foresight.
Visualizing the Importance of Trust to the Banking Industry
In the digital age, the issue of trust is emerging as the game-changing factor in how consumers choose financial services brands.
Visualizing the Importance of Trust to the Banking Industry
In the digital age, money is becoming less tangible.
Not only is carrying physical cash more of a rarity, but we are now able to even make contactless payments for many of the products and services we use on the fly.
Our financial transactions are starting to be analyzed and optimized by artificial intelligence. Meanwhile, investments and bills are paid online, and even checks can now be deposited through our phones. Who has the time to visit a physical bank these days, anyways?
Trust in the Digital Age
The migration of financial services to the cloud is increasing access to banking solutions, while breaking down barriers of entry to the industry. It’s also creating opportunities for new service offerings that can leverage technology, data, and scale.
However, as today’s infographic from Raconteur shows, this digital migration has a crucial side effect: trust in financial services has emerged as a dominant driver of consumer activity.
This likely boils down to a couple major factors:
Financial services are becoming less grounded in physical experiences (using cash, visiting a branch, personal relationships, etc.)
- Personal Data
Consumers are rightfully concerned about how personal data gets treated in the digital age
Further, the above factors are compounded by memories of the 2008 Financial Crisis. These events not only damaged institutional reputations, but they elevated trust to become a key concern and selling point for consumers.
Trust, by the Numbers
In general, trust in banks has been slowly on the rise since hitting a low point in 2011 and 2012.
At the same time, consumers are consistently ranking trust as a more important factor in their decision of where to bank. To the modern consumer, trust even outweighs price.
Top Five Factors for Choosing a Bank:
- Ease and convenience of service (47%)
- Trust with the brand (45%)
- Price/rate (43%)
- Service resolution quality and timeliness (43%)
- Wide network coverage of ATMs (40%)
It’s important to recognize here that all five of the above factors rank quite closely in percentage terms. That said, while they are all crucial elements to a service offering, trust may be the most abstract one to try and tackle for companies in the space.
With this in mind, how can financial services leverage tech to increase the amount of trust that consumers have in them?
Tech Factors That Would Increase Consumer Trust:
- Reliable fraud protection (36%)
- Technology solves my problems (13%)
- Useful mobile application (9%)
Better fraud protection capability stands out as one major trust-builder, while designing technology that is useful and effective is another key area to consider.
Visualizing the Future of Banking Talent
Banking talent is undergoing a fundamental shift. This infographic explores how banks are adapting to rapid automation and digitization in the industry.
Visualizing the Future of Banking Talent
View the full-size version of the infographic by clicking here
Many organizations say that their greatest asset is their people. In fact, Richard Branson has famously stated that employees come first at Virgin, ranking ahead of customers and shareholders. So, how do businesses effectively manage this talent to drive success?
This question is top of mind for many bank CEOs. As processes become increasingly automated and digitized, the composition of banking talent is changing – and banks will need to become adept at hitting a moving target.
Six Ways Banks are Becoming Talent-First
Today’s infographic comes from McKinsey & Company, and it explores six ways banks are becoming talent-first organizations:
1. They understand future talent requirements.
43% of all bank working hours can be automated with current technologies.
Consequently, talent requirements are shifting from basic cognitive skills to socio-emotional and technological skills. Banks will need to analyze where they have long-term gaps and develop a plan to close them.
2. They identify critical roles and manage talent accordingly.
It is estimated that just 50 key roles drive 80% of bank business value. Banks will need to identify these roles based on data rather than traditional hierarchy. In fact, 90% of critical talent is missed when organizations only focus at the top.
Then, banks must match the best performers to these roles and actively manage their development.
3. They adopt an agile business model.
Banks will need to shift from a hierarchical structure to an agile one, where leadership enables networks of teams to achieve their missions. As opportunities come and go, teams are reallocated accordingly.
This flexible structure has many potential benefits, including fewer product defects, lower costs, shorter time-to-market, increases in customer satisfaction, and a bump in employee engagement.
4. They use data to make people decisions.
Instead of making decisions based on subjective biases or customary practices, banks will need to rely on the power of data to:
For example, company data can be used to develop a heatmap of the roles with the highest attrition rates. Leaders can then focus their retention efforts accordingly.
5. They focus on inclusion and diversity.
Gender and ethnicity diversification leads to higher financial performance, better decision making, higher employee satisfaction, and an enhanced company image.
Industry-leading banks will set measurable diversity goals, and re-evaluate all processes to expose unconscious biases. For example, one organization saw 15% more women pass resume screening when they automated the process.
6. They ensure the board is focused on talent.
Only 5% of corporate directors believe they are effective at developing talent.
To be successful, boards will need to recognize Human Resources (HR) as a strategic partner rather than as a primarily transactional function. The CEO, CFO, and CHRO (Chief Human Resources Officer) form a group of three that makes major decisions on human and financial capital allocation.
CEOs worldwide see human capital as a top challenge, and yet they rank HR as only the eighth or ninth most important function in a business. Clearly, this is a disconnect that needs to be addressed. To keep up with rapid change, banks will need to bring HR to the forefront – or risk being left behind.
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