The role of trust and brand in the great incumbent versus fintech showdown

There is no escaping the fact that the majority of the financial services we consume daily have become indistinguishable commodities to most of us.

In a market where everything is various flavours of the same vanilla, customers either stick with what they have, or chase bargain-bottom pricing. “Who cares if we’re boring”, financial providers say to themselves. “So is everyone else. Plus they trust us.”

These days it’s hard to go past a press article or finance blog that doesn’t mention the phrase ‘clever marketing’ – or some other thinly veiled backhanded compliment – from grey haired industry experts called upon to discuss the meteoric rise of startups in various fintech ‘hot spots’.

And while here and there you’ll find a few pearls of wisdom, what most of this commentary has amounted to is a clever (and calculated) de-positioning of the one tactical weapon traditional financial services firms don’t have – a great brand capable of being marketed successfully. Capable of winning customers hearts, then minds.

Unfortunately for incumbents, many new entrants will prove they are more than capable of playing by the same regulatory rules as their forebears – possibly even better. Which means if they can combine financial nous with brilliant creative, then the un-commodification of financial services may come a lot sooner than anticipated. Combine this with a growing realisation by many that the tactics used to make FMCGs successful can now, thanks to deregulation and increased access to technology, be applied in a similar way to finance, then you have serious disruption. In many ways, it will be through brand, that 100 years of trust will be achieved in a much shorter timeframe.

In a glimmer of hope for existing incumbents, the famous Edelman Trust Barometer has indicated trust in traditional FIs is on the upswing. But there is still baggage. Fintech startups on the other hand who are ‘entering the conversation with authenticity’, are, according to Edelman, garnering high trust readings off the bat, of 64 to 72 percent in areas involving mobile applications and blockchain.

There are a lot of people and businesses who have become incredibly wealthy off opaque and vanilla financial services businesses that require them to do very little in the way of trying to keep their customers happy, off the back of a trust bank created over generations. But something in the wind tells me that is changing, and that established players who choose to underestimate the power of brand versus baked in trust will do so at their peril.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech. Jessica Ellerm is a thought leader specializing in Small Business.

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