Business Insider
- The financial services industry is poised for a permanent upheaval as a result of the coronavirus pandemic, according to CTBC Bank’s US CEO Noor Menai.
- “We’re all fintech firms now,” he told Business Insider. “It’s a profound change, but it turns out it wasn’t that hard. It just took an emergency … to focus the mind.”
- For a company like CTBC Bank that operates more like a community lender in the US, the pivot to digital means more than just creating new applications.
- The firm is weighing an increased budget to hire top talent from corporations like Amazon to help market the new products to customers, according to Menai.
- Click here for more BI Prime stories.
The coronavirus pandemic upended nearly every US company and it remains to be seen what industries will be able to return to business as usual once the outbreak subsides.
But one sector that is poised for a permanent disruption is financial services, according to CTBC Bank’s US CEO Noor Menai.
“We’re all fintech firms now,” he told Business Insider. “It’s a profound change, but it turns out it wasn’t that hard. It just took an emergency … to focus the mind.”
Unlike traditional banks that still rely on brick-and-mortar locations, fintech startups like NuBank, Revolution, and Chime have used mobile-first strategies to attract millions of customers.
While industry behemoths like JPMorgan Chase and Citigroup employ many of the same digital tools, the legacy aspect of its business remain a key investment area.
But as the coronavirus leads to rapid changes in consumer behaviors — namely a reduction of in-person interactions — Menai argued that old-school financial institutions will no longer look at “fintech as something curious, something that other people were doing.”
Now, “we’re all seeing those models around convenience and delivery and doing things not necessarily involving humans is not just doable, but desirable,” he said.
And the pivot to the digital world will have even more ramifications for the smaller banks.
While Taiwan-based CTBC Bank globally manages $180 billion in assets, its US business operates more akin to a community lender. Its 13 physical locations are segmented to California, New Jersey, and New York.
And the hyperlocal tendencies of regional players like CTBC were obliterated by the pandemic, forcing many to pivot to a technology-first model, according to Menai.
No longer will smaller banks be limited to specific zip codes or be forced to open physical branches if they wish to expand to new locations, he added.
“For community banks, we were always geographically bound,” said Menai. “The more traditional type of bankers may want to go back to that model and may be pining for it, but I don’t think customers will want that anymore.”
‘We’re not talking about hardware, software’
But such a shift is more complicated than just investing in new digital tools, like a consumer-facing application that would allow clients to deposit checks or access accounts entirely virtually.
Fintech firms were able to achieve immense scale in a short period of time by offering their products for free and eliminating requirements that legacy institutions rely on, like minimum balances, according to Menai.
“Long-term, that’s a crazy model. We just cannot do it, which is why you don’t see even high-tech adopters or innovators like Citigroup or JPMorgan giving away their products for free,” he said.
So as CTBC pivots to adopt more of the fintech operating model, it has to begin embracing some of the marketing strategies that have divided the new entrants from the incumbents.
“The labels might be the same as if you were doing a traditional product, but the steps involved are completely digital. And the science around data management and the targeting of those are very different,” he said.
To help in that transition, CTBC is considering increasing its digital budget to hire the right skill set from top tech firms like Amazon.
“We’re not talking about hardware, software. We’re not talking about capital expenditures. We are talking about making the key hires,” he said. “We need to bring in the pools of talent who can help us map out the pathways to being digitally native.”
In the past, top Silicon Valley talent may have looked to industry heavyweights like Goldman Sachs or Chase.
But Menai said those firms “may have enough of those guys and the next place for these experts is where the other mass of people actually bank” — like community and regional lenders.
The change also means that CTBC can pivot more employees to the remote setting, a dramatic shift for a company that pre-coronavirus largely eschewed the concept of work-from-home.
“The core of getting a job done will get done without the physical cues, without the emotional strengthening of like-minded people being together in a physical location,” said Menai.
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