infinant: Innovation in the Last Mile Is Coming to Banking

Banks have three growth options. They can acquire another bank, create digital apps or virtual services, or expand their delivery channels. While focusing on the first two choices is a possibility but narrowing their efforts on delivery channels, banks are able to compete and collaborate with the newcomers on the block: fintechs.

Historically, banks have lacked control over the first, middle, and last delivery stages. However, it is possible for them to learn from streaming services. In doing so, banking platforms can better understand the significance of user data control and, in turn, apply similar strategies to enhance customer relationships and services.

Expanding on this further, we hear from Riaz Syed, CEO and founder of infinant, the embedded finance platform. With more than three decades of experience in delivering technology platforms that drive customer engagement with core business values, Syed explains how delivery channel innovation is coming to banking.

Innovation in the last mile is coming to banking

We live in a world where Hulu, Netflix, or BritBox can gather content from a variety of distributors and studios, and bring them into one place for their customers. Added to that, they provide an engaging experience, easily personalise recommendations, and offer features like instant purchases, watchlists, and offline downloads.

Okay, but what does it have to do with the world of banking?

Well, the convenience that they have provided has drastically changed consumer expectations regarding last-mile delivery. And people want the same seamless experience not only from their streaming platforms but also from their financial services providers.

Fintechs have understood that innovation in the last mile delivery was an opportunity in the financial space and, therefore, started giving consumers what they want the most—simple, convenient, and cost-effective products. Their efforts have proven successful. Fintech competitors have caught the attention of 75 per cent of banking customers, according to a study by Capgemini. As for traditional banks, they have lost ownership over last-mile delivery.

However, this doesn’t have to undermine their future. In fact, the time is ripe for banks to improve their last-mile delivery systems and strengthen their positions in the market. Let’s dive deeper.

Why Banks Have Struggled To Enhance Their Last Mile Strategies

Banks have lacked ownership over the last delivery channel for several reasons. For starters, they often rely on legacy core banking systems and digital banking applications that have been in place for many years. These systems are deeply entrenched within the bank’s operations and hard-wired to their core. That’s why it can be quite challenging and costly to introduce innovative changes and technologies into their existing infrastructure.

Moreover, legacy platforms have cost structures that exceed the economics to launch new banking as a service (BaaS) channels and fintech programs. In contrast, fintech companies have secured substantial investments from venture capital firms and other sources of funding—although there has been a pullback recently. Therefore, it has been easier for them to build agile, technologically advanced platforms and applications from scratch, unburdened by legacy systems.

Last but not least, banks operate in a heavily regulated environment, as they play a critical role in the financial system and need to protect valuable assets and data. On the other hand, fintech startups can operate in areas with fewer regulatory constraints and navigate regulatory requirements more efficiently by leveraging technology-driven solutions. This regulatory gap also allows fintech companies to allocate resources more freely to innovation and rapid development..

But the Winds of Change Are Blowing

Regulatory bodies, such as the Securities and Exchange Commission (SEC), the Department of Treasury, and the Financial Industry Regulatory Authority, sharpened their focus on the fintech industry. They are creating frameworks and guidelines that ensure fintech innovations adhere to necessary regulations.

The evolving regulatory landscape opens up opportunities for banks because they can leverage their in-depth knowledge of handling regulated processes to form partnerships directly with fintech organisations. Especially ones that require the expertise to power their business and applications. This collaborative approach—through a banking platform—enables banks to launch fintech programs directly and in compliance with regulatory requirements.

What’s more, through advanced technologies such as an event-driven platform, banks can launch fintech programs above-their-core. This avoids costly core modernisation projects. In addition, it becomes possible to rearrange, add, or remove components within their fintech programs, creating a composable banking ecosystem. Such adaptability enables financial institutions to tailor their services to meet the unique needs of customers and rapidly adjust to ever-changing market conditions.

Looking to the Future

By improving their delivery systems, more banks will be able to diversify their channels and be agnostic to the last mile—by powering fintech, brand and enterprise applications. This means a shift in how banks move from traditional bank-branded apps as their engagement point to various digital channels and partnerships with non-bank applications.

In light of this, they will be in a position to expand their network and offer their products, money movement, regulatory services and fraud monitoring to a broader range of both retail and commercial clients.

Riaz Syed is founder and CEO of Infinant