Banking Industry Needs to Get as 'Frictionless' as Fintech

As the line between tech and finance continues to dissolve, consumers want banking experiences that are as frictionless as an Amazon order, says one expert.


Fintech (financial technology) companies continue to be a threat to traditional financial services companies, which need to make changes if they're to hold on to much more of their market share, the data and experts agree.

A late August report from NTT Data shared that 64 percent of banks see Fintech as a threat; nearly half of U.S. consumers already have an account with a Fintech provider, and 22 percent of consumers described Fintech offerings as "how banking should be."

Peter Olynick, senior practice lead of retail banking for NTT, said at the report's release that consumers "want a better experience by the latest technologies and they don't really care who is delivering it."

Monica Eaton-Cardone, CIO and founder of Global Risk Technologies and COO and founder of Chargebacks911, agrees.

"We're in the age of consumer entitlement," she told eWEEK. "It used to be that the No. 1 priority [in e-commerce] was security. … Today, the top-ranking interest, certainly among Millennials, is instant gratification. They want frictionless methodologies."

An example? "Today, if you have to actually take your credit card out of your wallet, it feels like too much work," she laughs. "When we shop, we want to choose, sometimes down to the hour, when something will be delivered, and we want free returns if we wind up not liking what we've bought."

Chargebacks911 resulted from what ensued once the friction was removed from e-commerce, via companies such as Amazon. It became so simple to contest a charge that consumers began abusing the mechanism put in place to protect them. According to Eaton-Cardone, fraudulent chargebacks—customers complaining to their credit card or bank of a "fake charge" that's not really fake—increased by 41 percent over the last year and by 155 percent between 2009 and 2014.

"What's fueling that increase?" asks Eaton-Cardone. "It's the additional technologies that are evolving to satisfy the consumer."

Still, she understands they're something of a necessary evil—a side note to the changing big picture.

"I hate processing fraudulent disputes, but the fact is, you have to allow customers to make fast payments," she explained. "You won't survive if you keep serving them the way you did in the past."

One of the most important statistics that consumers look at, she continued, is how quickly a charge dispute is processed.

"Capital One now advertises O percent liability," said Eaton-Cardone, offering an example of a company that's quickly adjusted to changing times. "It's also no longer enough to have a nice-looking website—it has to be fast. If it takes more than 6 seconds to load, people are out of there."

Over, too, is counting on relationships.

"The traditional mentality that, 'We can keep customers by offering good customer service'? Forget it. I don't want to go to the bank—the most important thing to me is my time. I want my statement online, sent to me, and I want my bank to alert me when there's a fraud, not that I need to call them. Apple Pay, Google Wallets—there used to be a separation between the geeks and banking."

Not anymore, she said.

That warning alarm has been sounding for some time. Accenture reported back in May 2014 that a survey found consumers were open to banking with, and trusted—as much or more than the banks—many of the technology companies they engaged with every day.

Among the 18- to 34-year-olds surveyed, 40 percent said they would bank with Google, were Google to offer banking services, while 34 percent said the same about Apple and 46 percent said they'd bank with PayPal.

"Tomorrow's consumer is coming of age with a very different perception of what a bank could be," Wayne Busch, managing director of Accenture's North American Banking practice, said in statement at the time. "Those expectations could become profoundly disruptive to banks if non-bank entrants gain momentum and banks fail to adapt quickly."

Eaton-Cardone said she still sees the banks struggling with legacy software.

"One weakness I see is the banks not being agile enough to … respond to a new environment. They need to be more willing to change," she added.

"If you listen to the demands of consumers, what's wanted is a frictionless experience. It's already in payments, and it's crossed the bridge into the finance industry for sure."