As technology advances and we continue to become an increasingly digital society, financial technology companies – fintechs – are on the rise. Various fintech companies offer a wide range of technologies and services, including apps for banking, P2P payments, budgeting and investing, just to name a few.
Fintech banking companies like Chime and Dave – sometimes called neobanks – are becoming strong competitors for traditional, brick-and-mortar financial institutions. These online-only companies offer basic banking services on a convenient app platform. But don’t let them fool you – most of these companies aren't actually banks; they're middlemen. They may appear to have an advantage over traditional institutions through better rates, cash incentives and credit-building features, but consumers may not know the risks and downsides of banking with a tech company rather than a chartered financial institution.
With enticing incentives and large-scale, multimedia marketing campaigns, fintech banking companies can be incredibly appealing to consumers. So how do you compete?
Educate your accountholders.
Educating your accountholders on the risks of banking with a fintech is a great start. Fintech banking companies are still fairly new, and many consumers aren't aware of the implications of placing their money with them. Inform customers that since most fintech "banks" aren't chartered financial institutions, they aren't FDIC or NCUA insured. Instead, fintechs “merely collect money and funnel it through intermediaries to banks,” as explained by The New York Times. “If one of those intermediaries runs into trouble… you could be left without access to your money.”
Emphasize the attributes that set you apart.
What do you offer that fintechs don’t? (Other than deposit insurance, of course!) For starters, most fintech banking providers offer only basic products, like checking and savings accounts and debit and credit cards. On the other hand, traditional financial institutions offer the full range of products and services for all life stages: student loans, auto loans, home loans, investment products. Other pros include providing live, local customer service instead of just a chatbot or overseas call center, or benefitting the community by supporting charitable causes or funding scholarships.
Consider cross-selling or implementing a retention strategy.
When your accountholders are looking for a new product or service, you’ll want to make sure your institution is top of mind. Cross-selling and retention strategies like onboarding and Marketing Automation are a great way to do so.
Identify the financial needs fintechs are serving that your institution may not be.
An important question to ask yourself is this: “Why are people switching to fintech banking companies?” Recognizing the needs that are being met there can help you understand how your institution can improve and grow.
And although fintechs may be competitors, remember that many individuals have accounts at multiple institutions. Just because someone uses fintech banking does not mean they don’t also need a traditional, brick-and-mortar financial institution.
Interested in boosting your institution’s marketing strategy to account for fintech competition? Our knowledgeable account managers are here to help you create a unique strategy for your brand! Contact us today at 800.777.1663.
Sources:
nytimes.com/2024/08/10/business/online-lending-banking-money-risks.html
forbes.com/advisor/banking/what-is-a-neobank/