While money flows to fintech startups seeking to disrupt everything from payments to insurance to banking and capital markets, fewer than half of existing financial institutions say they have a fintech strategy of their own, KPMG found.
So how will existing players survive and even thrive in a rapidly shifting industry where consumers increasingly expect technology-driven and consumer-centric solutions and upstarts are sprouting to provide just that?
Data and new technologies will play a big role in offensive or defensive strategies. With that in mind, there are some things that legacy players should do and some things they should not do.
My top do’s and don’ts:
Don’t just copy the disruptor. Legacy players cannot copy an upstart because legacy players have existing footprints and customers and are anchored by valuable business models. For instance, Oscar Health, billed as the first-ever technology-driven health insurer, had no legacy to hold it back from starting something completely new.
However, their existence didn’t necessarily spell impending doom for the incumbents. That’s because incumbent players have something upstarts don’t and that is customers, as well as the data that goes with the customer base. They also have time-tested products and services. So, if you’re an incumbent looking to protect your flank against an upstart, you must identify those services that would benefit most from digitization, and provide the most tangible immediate value to your existing customer base to keep them from defecting to an upstart.
Do leverage your biggest asset: your customer data. To digitally transform, legacy players need to think about their business differently. To do this, they need to view their data as an asset. Then, they need to leverage that data to redefine their customer relationships, their customer experiences and to move into new markets. Today, many companies cannot even identify who their customers are, what they’ve purchased and what else they might need.
Data provides those answers and arms companies with the ability to deepen customer relationships so they are less vulnerable to being picked off by newcomers. In fact, if the data is leveraged properly, new products and services that leverage the data effectively don’t even have to be as slick and fancy as those of the fintech startups — at least not at first. The fact that you’re leveraging the data to deepen the relationship will allow any associated new customer-facing tech product to be “good enough” for a period of time. In fact, in his book “Zone to Win,” Geoffrey Moore refers to this “good enough” response as “neutralizing” an offensive coming from disruptors, one of the early steps an incumbent should take when dealing with market disruption. A thoughtful yet nimble data strategy is a great foundation from which to launch such an initiative.
