As if competing against other FIs isn't enough, today's financial institutions face significant competition from fintechs, those new, “sexy” startups that woo account holders with provocative pitches.
Fintechs are enticing, but they cannot match the level of service offered by traditional financial institutions
What's often lost in the marketing speak, however, is that fintechs do not have the same capabilities as financial institutions and credit unions.
Unlike traditional financial institutions, fintechs haven't spent years (or even decades) establishing account holder relationships. They eschew hands- on, face-to-face advice and support in favor of flashy interfaces that, while effective, can't replicate the trust factor earned through relationship building.
Perhaps more important, fintechs have siloed, single-product offerings. They tend to do one thing and do it well, but they do not offer multiple product suites. That means small businesses must seek multiple fintech providers
to service their entire range of needs. The boom-or-bust startup landscape means fintechs are high risk, too: small businesses might invest significant resources into learning multiple platforms, only to start over again when a single fintech fails.
Busy SBOs do not have the time or need to diversify service providers. Rather, many want the simplicity and security of being able to take care of everything under one roof.
Integrated services that take the strain off SBOs
Where fintechs are high-risk and siloed, FIs can offer low and no-risk all-in-one solutions that empower small businesses to focus on growth. Financial institutions can compete – and win – against fintechs with integrated offerings that save small businesses time and money, minimize risk and, ultimately, are more effective at helping SBOs achieve their financial goals.
FIs save SBOs time and money
With fintechs, small business owners must seek multiple providers to
start up and optimize their companies. They must invest resources into learning different platforms and linking them with various APIs (which can incur technology costs) to achieve holistic financial environments in which everything works together.
That takes a lot of time and can potentially cost more than consolidating services with a single financial institution. Moreover, integrated offerings reduce or eliminate new platform learning curves, so SBOs do not need to invest time and money in training staff how to use multiple systems.
FIs minimize risk
Fintechs inherently add risk to small businesses. If a fintech service provider fails, companies effectively lose all the time and money they've invested in their platforms. If multiple fintech services are linked via APIs, a single fintech failure can cause a chain reaction that demands immediate and emergency action from SBOs.
Financial institutions, on the other hand, are practically fail-safe. They understand the need to make any changes or transitions smooth for account holders. And, with everything under one roof, there is no risk of a critical component failing without a safety net. FIs recognize the onus is on them to maintain critical services at every point, while fintechs are only concerned with maintaining the siloed service each provides.
FIs get the big picture
With fintechs, there is a disconnect between providers: No single company gets the big picture because they are solely focused on
the single service they provide. They do not have the comprehensive capabilities or the incentive to help small businesses meet all challenges and optimize their companies for success.
Conversely, FIs can provide holistic service offerings that cater to a wide range of small business needs from a single, central platform. Focused on building relationships, a bank understands individual customer goals and can chart a course for helping them achieve success. In short, banks get the big picture and are uniquely positioned to provide the services small businesses need at every stage of the entrepreneurial journey.
These attributes make financial institutions attractive partners for small business owners, and they make a compelling case for why SBOs should consider banks and credit unions over fintech firms. Recognizing FI competitive advantages is the first step; next, banks must develop integrated offerings tailored to SBO needs, then launch targeted marketing campaigns to communicate the benefits of those services to small business owners.
