Bridging the Trust Gap: How Fintechs Beat Incumbents at Their Own Game

Financial sector innovation in the last century has sprung largely from the need to avoid the old fashioned bank run. Whether it was lines of anxious depositors lining up down the block in the 1930s, or fears that ATMs might no longer dispense cash in 2008, our relationship with financial institutions is nothing without trust.

Trust can come from tangible things like well-pressed suits and large, sturdy columns at the front of the bank. But it also comes from a body of psychological research that informs decisions being made every day in the world of digital banking. People are closer than ever to the technology to control their money, but technology can leave them feeling further than ever from trusted advisors and resources to help them make the right decisions. Balancing the human touch with cutting edge technology will be the key differentiator in the fintech market.

Fintechs don’t enter the market with assumed trust. In finance, an industry built on managing other people’s money, longevity speaks to reliability. But legacy financial institutions have left an opening for competitors by neglecting the technology side of the customer experience.

Savvy customers know that they deserve the best of both worlds: the cleanest, fastest technology and access to humans they trust to help them use it.

Technology only gets you halfway to success

Most people don’t like wading through the archaic pages of a website designed in 2005 to figure out how much their 401k grew this year. Automated customer support phone trees and endless games of phone tag to reach a human voice scare most people away from dealing with banks and financial services companies unless their lives depend on it.

Silicon Valley, doing what it does best when it spots an inefficiency, developed a disruptive cousin to the stodgy old bank, aptly named the “neobank”. These banks don’t offer physical retail locations — instead, they find ways to reach their digitally native customers directly. With the tap of a button, users can navigate a clean interface to make transactions, get account documents, and access their credit score.

It makes sense that fast-moving, digitally native companies backed by venture capital were able to beat legacy banks in the initial technological pivot to mobile banking. But the upstarts will need to build a customer experience that fosters communication and trust in order to remain serious players in the financial services market.

All customers are digital customers

Neobanks are only the first example of the market dynamics unfolding for the broader range of fintechs. It’s more important now than ever for financial services companies to know how to reach their customers. Accelerated by the effects of COVID-19, mobile banking is becoming the default even for consumers who don’t know what a TikTok is. 72% of customers at the four largest US banks used mobile banking apps for some form of transaction in April 2020, up nearly 10 percentage points from 2019.

Beyond the simple user interface, mobile banking offers the peace of mind associated with fingerprint access. Mobile banking can also help gamify and encourage habits like saving and building strong credit, even for the youngest students of financial literacy. But if 72% of customers at traditional banks are using mobile apps, fintechs and incumbents will have to win market share by building the best customer experience for those not naturally comfortable with banking online.

All of this brings us back to trust. The Edelman Trust Barometer indicates that consumer-facing fintechs face significant “trust gaps” around issues like data privacy and reliability. A brand emphasizing innovation risks losing points for dependability and experience. Edelman predicts companies that are “consistently visible, front-of-mind and credible voices on relevant issues” will most quickly bridge these trust gaps. But that premise applies equally well to direct communication with customers – consistent, visible, and reliable customer support is key to building a trusted brand.

Technology should enhance human relationships, not replace them

In a time of technological disruption and unprecedented brand disloyalty, for digital banking and fintech sectors the most trusted brand likely wins. That’s not to say it will be a winner-take-all market, but VCs are betting that the returns to scale will be worth it for the handful of banks that come out on top.

Without the physical trappings of physical banks to convey enormity and stability, the pursuit of lasting digital trust will be far more nuanced. Avoiding clunky web design and bloated ad load times will become table stakes, as will sleek branding and shiny debit cards. Communication and an unparalleled customer experience will be key. Trust will grow from digitally recreating the experience of a firm handshake and a face that asks about your kid’s soccer game.

Solving the customer communication challenge in an increasingly digital banking environment is the most straightforward path to recreating a relationship built on trust. People want to know where their money is, and that it’s safe. But they also want to know that, from the comfort of their own home, they can talk to someone who cares as much about their problems as they do. That’s why the winners of the digital banking future won’t necessarily be the ones with the flashiest bells and whistles, or those offering access to an options trading account. It will be the companies that build trust from a foundation of communication and customer service.

By Elad Eran, Founder & CEO of Wix Answers