By Kat Jackson, Head of client services, The Media Foundry
Kat Jackson
The UK’s fintech sector is facing a lot. Often small and scaling businesses, they are staring down the barrel of cost of living and economic pressures just like every other company.
On the one hand, sector funding still remains plentiful. The sector is performing well in M&A deals (source) and even taking into account the ongoing political turmoil within Westminster, the industry is receiving ongoing support as a shining success story for the country. However, cracks are also starting to show. High profile fintechs have been falling by the wayside, including Flux and Bank North. So far, so volatile. So 2022.
Now, it looks like more and more traditional banking institutions are starting to encroach on to fintech turf. It’s may have been a long time coming, but with NatWest now developing a business banking as-a-service offering, those early digital moves from the traditional banking players will start to accelerate. Covid may have fuelled faster thinking in digital banking innovations for the big behemoths, but cost of living pressures are impacting both customer and institution, and making both carefully consider their focus, and spend. Digital-first services line up nicely alongside closing costly branch properties around the country for traditional banks, as the customer base also matures to see digital banking services as a first port of call, ahead of in-person counter service.
This acceleration in digital banking services may help single-point solution fintechs, whose offerings are largely geared towards ensuring one part of the mammoth and creaking banking machine works better. For more ambitious and rounded services, including the burgeoning neobank cohort, it begs the question; if the big traditional banks are now also digital-first, how does the innovative newcomer stay ahead and keep connecting with customers?
This fresh challenge comes just as many companies are also facing pressing demands on their own bottom lines. The first cost on the chopping block at times like this is often marketing. It typically looks like significant expenditure, balanced against fuzzy or mid- and long-term returns. However, at a time like this, cutting marketing budgets in fintech would be an additional folly. The sector is exceptionally competitive, indeed levels of consolidation are already well underway. If the business vision was always to scale and sell, brilliant. However, if the goal was to truly change the financial landscape through innovation, it is essential that fintechs, altfi and neobanks keep that critical ‘line of sight’ in front of their customers and prospects.
The large banks’ biggest selling point has always been longevity. Trust. Heritage. Many of them have been around for centuries, they are by definition a safe place to keep that hard earned – and in these days, hard held-on to – money. Neobanks and digital innovators have been doing a great job of showing just how to challenge these traditional banking methods to be updated for modern times. If the industry stalwarts now adopt this position, it snatches that high ground from under these innovators’ feet.
While the times ahead will require each and every business in the UK to make hard decisions on their finances, taking a sledgehammer to marketing, advertising and PR could well also remove the foundation on which customer trust in these new services is being built and sustained. It is well known how hard it is in the banking sector to get people to switch accounts – even after experiences of poor service or frustrations with a provider, and with financial incentives to switch, tendency to switch remains low (source). For innovative providers to throttle back their engagements with customers doesn’t only risk suggestions that they, too, may be in trouble. It also removes the ongoing dialogue about what they are doing so well, and why that matters.
The coming months will be hard on wallets – business or personal. Tough decisions are already being made. But for those in competitive space where attention is everything – whether that is as a fintech SME struggling to be seen above a sea of competitors, or a neobank agitator driving the market onward, one of the most dangerous decisions on the table could prove to be how their all important communications channels continue on, and in what capacity.
