Finance is a conservative industry.

While digitization has already revolutionized most other industries, financial institutions have been slow to embrace new technologies and new ways of banking.

But those days are over. Several factors have combined in the last few years to force traditional banks to finally make the transition into the 21st century. Those trends include the pandemic, which gave a global push for digitalization across all sectors, and the continued rise of cryptocurrencies and decentralized finance (DeFi), which provide new services that many banks still don’t offer.

Banks large and small were still resistant to change up until the pandemic, and now Some banks like Digital International Bank are even offering “hybrid banking” services which bridges the gap between traditional banks and their digital counterparts. they are trying to make the digital transition as fast as possible. DeFi platforms have been offering new and more convenient online banking services for years, and now some of the biggest banks in the world are trying to catch up.

It’s especially a challenge for smaller financial institutions. Even local banks must meet the same regulatory standards as their larger counterparts, yet they often lack the resources to make the digital transition as easily as a national institution.

There’s now rising competition between those local institutions, megabanks like Goldman Sachs, and the new fintech banks that are skyrocketing in popularity around the world.

Customer Engagement

Some of us remember when banks sent every piece of financial information via snail mail. Those days are long gone, as most people now prefer to keep everything digital.

Most people use their phones for every part of life, and banking is no exception. As traditional banks try to keep up with the times, they need to create mobile apps and websites that provide an easy and convenient customer experience.

With the rise of apps like Venmo, PayPal, Cash, and Square, which offer super-convenient ways to receive and share money, along with other services, traditional banks must offer similar usability to keep up with the times.

Conversely, modern consumers have less patience, said Bardya Ziaian, a Canada-based fintech entrepreneur. 

“If a bank’s app isn’t providing top-notch usability and a diversity of new online services, their users will leave for a system that has the things they’re looking for,” Bardya Ziaian said.

Foster FinTech Partnerships

Traditional banks don’t need to view their relationship with newer fintech businesses solely as a competition.

In fact, banks can benefit from creating partnerships with fintechs to help upgrade their outdated systems while preserving the aspects of their business that their customers appreciate.

Banks that put selling ahead of the customer experience won’t succeed, wrote Bipin Sahni, Chief Strategy Officer at Persistent Systems, for The Financial Brand. Partnering with fintech businesses can help with that.

“Circumstances continue to shift and there’s increased appetite amongst traditional players to partner with fintech companies,” Sahni wrote. “Today, the question isn’t so much about need for such partnerships. It’s more about the strategies and mindset needed to make them successful for both parties.”

It’s All About The Community

While traditional banks have a steep road ahead of them to provide the important new services being added to their industry, the most important thing is to stay true to their community.

“As you grow, you don’t want to lose your community roots and the relationships and the service you provide, even though you know digital is absolutely a channel you have to offer and you have to be great at it,” said Ross Creasy, Chief Innovation Officer at Ameris Bank. “You don’t want to lose those roots as you get bigger.”

Paul Petersen