Fintechs are flourishing in a post-pandemic world. Equity funding for fintech companies doubled last year, bringing the industry’s global market value to about $5 trillion. Meanwhile, data from Statista found that roughly 65% of the U.S. population uses digital banking services, up from around 61% in 2018. That means more than 16 million Americans have adopted digital banking services over the past five years.
Mass mobile banking adoption suggests the financial future will be digital-first. Fintechs excel in this environment because digital applications developed on, by and for mobile devices usually provide a better user experience. Still, financial leaders must unpack how this trend will affect their bottom line. Understanding post-pandemic consumer behavior is the first step toward generating more meaningful, modern and holistic user experiences for fintechs, Big Tech, and traditional financial institutions (FIs).
Mobile payments are on the rise
Challenger banks—neobanks or digital-only banks—are increasingly popular. The global neobank market is expected to reach $2.05 trillion by 2030. Statista also predicts the number of neobank account holders in the U.S. alone will reach $40 million by 2025.
A decade ago, opting for a bank without a traditional brick-and-mortar presence probably seemed unthinkable. For many, the personalized customer care that physical banks provide is crucial to the overall financial experience. But fintechs have made great progress in improving the user experience of online-only banking, and many consumers—especially millennials and Gen Zers—now prefer to manage their financials on the go. Highly effective UX eliminates the need for a brick-and-mortar bank, at least, in the eyes of some users.
Fintechs have excelled in this digital environment because their platforms are created exclusively for mobile use, and so their user interface is usually a priority. But FIs also stand to gain from the trend toward mobile, easy-to-use platforms. FIs must consider offerings that will entice consumers to use their mobile wallets. In many cases, that means making banking apps an “all in one” stop shop for customers—an ecosystem, if you will. Instead of providing incomplete loan information, FIs should revitalize their online presence to provide robust loan application portals, financial wellness information, and credit score solutions.
Consumers are more likely to engage with a bank’s app or site if it provides a relevant portfolio of financial information. And the benefits go both ways. A consumer’s financial history can be used to pre-determine loan qualifications and personalize economic wellness outreach, allowing FIs to inform pre-qualified candidates how to refinance and consolidate their loans. That creates an easy, frictionless borrowing process, which is good for both the consumer and the bank.
Post-Pandemic Borrowing Behooves Fintechs
Financial uncertainty defined the early days of the pandemic. To address this, many governments encouraged borrowing through extended forbearance periods. Other FIs offered loans through the Paycheck Protection Program, designed to keep consumers afloat during tough times.
Two years later, the financial landscape has changed significantly. Loan applications are rising, and consumer credit debt is nearing an all-time high. Fintechs that reduce friction in the borrowing process have reaped the benefits. Now, banks have the opportunity to capitalize on that growth by presenting pre-qualified consumers with an intuitive and responsive loan application process.
Industry research shows that loan application processes longer than five minutes get abandoned by 60% of consumers. Users want easy, accessible applications they can start and finish on the go. As such, banking professionals should always prioritize responsive, mobile-friendly applications when searching for fintech partners. Even better, they should prioritize partners that compile consumers’ credit score information and lending histories to provide a detailed list of pre-qualified lenders. Doing so allows consumers to find relevant loan information at the perfect time.
Consumers Are Spoiled for Choice
Fintech companies are at an interesting junction. Digital financial processes were necessary for consumers in 2020, but now these applications are returning to a “nice to have.” Most consumers still opt to go digital, but now they’re exploring their options. If an application or bank doesn’t cut it, consumers are at liberty to find financial wellness options elsewhere.
Ultimately, the providers that win will offer extended functionalities like credit score solutions and streamlined loan applications. Superior UI will play a key role as well. In other words, while fintech companies adapt to their golden age, FIs also have an opportunity to expand and improve their market presence. And the benefits of doing so at the tail-end of the pandemic will be massive.