The rapid pace of technological innovation has created a massive transformation in the financial services industry. As a result banks must revive their business strategies and embrace the new digital revolution to compete effectively. Traditionally a laggard to technology adoption, financial institutions must embrace a digitally-savvy mindset in order to survive — or risk getting left behind.

While finance and technology have intersected since the inception of the wire transfer in 1918, examples of FinTech today look dramatically different than they did 100 years ago. In this new digital landscape, consumers can easily check their bank account balances or deposit checks from a mobile app, instantly transfer money to a friend or merchant via Venmo, apply for a mortgage online or engage in a cryptocurrency exchange. 

And FinTech is growing rapidly. According to Fortune’s annual FinTech report, cumulative investment globally exceeded $150 billion in 2017. Initially spurred by the 2008 recession, this new wave of growth brought customer-centric change to an industry that previously held customers hostage with complicated, slow processes, unexplained fees and constraining banker’s hours. To put these numbers in perspective, consider that Gartner estimates that traditional banks currently allocate 66 percent of their IT budgets to maintaining legacy systems, leaving only 34 percent to invest in business growth and transformation. What’s more, venture capitalist Nadeem Shaikh predicts that we can expect legacy financial institutions to experience a 20-60 percent profit decline by 2025 if they fail to cast aside their old guard mentality and evolve digitally, as asserted in an article in the Harvard Business Review. 

As FinTech startups launch at an unparalleled rate, they are offering 24/7 availability, faster turnaround times and minimal to zero fee offerings. While each has subtle differences, they share one common thread: an ongoing commitment to improving the user experience and solving persistent customer pain points.

Now, 10 years into the digital era, it’s evident that FinTech has the power to fundamentally disrupt how the world conducts business while reimagining the customer experience. So, what’s next? Traditional banking institutions and startups alike must adopt three key strategies to remain relevant in the increasingly competitive future of FinTech. 

1. Embrace the Power of Partnership 

It took 10 years, but the traditional banking sector has finally taken notice of the FinTech revolution. As consumers increasingly accept and adopt non-traditional financial services providers, traditional financial institutions are challenged to provide equitable customer experiences. This threat has become increasingly critical as FinTech expands beyond simple services into more complex territory, such as mortgage and wealth management. To defend their market share, traditional banks initially acquired FinTech startups. However, legacy banks, like Bank of China, Deutsche Bank and JPMorgan Chase are now relying on strategic partnerships to survive this digital renaissance. Given this trend, many startups are shifting to B2B strategies in an effort to directly tailor their services to the needs of leading financial institutions. These partnerships are ultimately beneficial for not only traditional service providers, which receive cutting edge services needed to enhance their existing portfolios, but also FinTech startups, which are able to acquire an entirely new user base. 

2. Adapt to the Blockchain Revolution 

Originally developed for the digital currency Bitcoin, blockchain technology allows digital information to be distributed without the threat of alteration or duplication. Information held on a blockchain exists as a shared and continually reconciled database. One of Gartner’s top tech trends for 2018, blockchain is “evolving from a digital currency infrastructure to a platform for digital transformation.” It’s an incredibly powerful digital business tool for three key reasons: (1) effectively removes business and technology friction (overhead); (2) enables native asset creation and distribution; and (3) provides a managed trust model. Additionally, according to Gartner, blockchain provides the enhanced transparency needed to trust potentially suspect environments, therefore eliminating the need for a central authority—a characteristic responsible for slow transaction times common with traditional financial institutions. According to a PwC study, 55 percent of financial service organizations expect to adopt blockchain as part of a production system or process this year, with adoption rising to 77 percent by 2020.  While the most common use cases include payment infrastructure, fund transfer infrastructure and digital identity management, blockchain’s potential applications extend far beyond the financial arena – holding value for government, healthcare, manufacturing, supply chain, content distribution, identity verification, title registry and more.

3. Enhance Security Measures to Cultivate Trust 

Trust is of paramount importance in the financial services industry, and traditional organizations establish trust over time through heritage, insurance and regulatory compliance – areas that are aligned to a lesser extent with newer FinTech companies that are often subject to lesser regulation. Instead, FinTech industry leaders are cultivating trust through an increased emphasis on protecting customers’ sensitive information.  In an era in which security breaches are on the rise, FinTech is looking toward the next generation of identity management with a renewed focus on personal authentication through user-owned products or services (i.e. iris scans and facial recognition). Emerging technologies like blockchain, artificial intelligence and biometrics will provide tremendous value to FinTech organizations in the year ahead, enabling them to maintain and enhance critical security measures. While many consumers are familiar with virtual currency and instantaneous financial transactions, trust continues to be the leading hurdle to widespread market adoption. 

In this environment, adaptability will be a key determinant of future FinTech success – and change leadership, as a result, will be a critical enabler. As financial institutions become more technically adept and seek to disrupt their own operations and processes, they’ll inevitably encounter mindset challenges within their organizations, coupled with cultural obstacles with their FinTech partners. Becoming more customer-centric will require adjustments to technical skills and visionary talent to successfully influence business process, policy and service orientation. And to expand beyond early adopters, FinTech will need to focus on customer education and a renewed commitment to trust and security. Whether guiding employees or customers, change leadership will be at the heart of our digital future.