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How Banks Lost Customers by Failing to Keep Up with the Times


7 min read

The digitization of banking services has transformed how customers manage their finances and interact with financial institutions, leading to a significant shift in the banking industry. The convenience, accessibility, and efficiency of digital interactions have raised customer expectations, pushing banks towards a new horizon. 

However, traditional banks need help safeguarding their clientele against more innovative and tech-savvy competitors. The rapid advancement of technology has left some unprepared banks at risk of being left behind, with 64% of banks struggling to acquire new customers due to a lack of agility in embracing cutting-edge technology. While traditional banks have focused on providing specific financial products, fintech has adopted a more holistic approach, addressing immediate financial requirements and intricate client problems. To remain competitive, traditional banks must urgently integrate digitalization into their core strategies, attracting and retaining clients seeking a seamless blend of technological prowess and personalized service. 

In the following discourse, we will explore the multifaceted realm of digital transformation within the banking industry and delve into strategies that empower traditional banks to ascend to greater heights while preserving the sanctity of their customer relationships.

Innovative and Disruptive Banking Technologies

Fintech has started a transformation in the utilization of technology, leading to the creation of new, innovative financial services. Nowadays, the way technology grows and brings market disruption is not only evident but more dangerous to traditional banking.

Outdated systems, rigid and unable to modernize quickly, leave incumbents behind in this race. New competitors bring new standards that can’t be met with mainframes and sprawling branch networks. Customers turn to more user-friendly, seamless, fast operations with enhanced transparency and inclusive opportunities. 

Why is digital transformation such a high priority for banks

With new technologies, fintech, and digital banking, customers can access the simplicity and seamlessness of previously daunting processes. Most challenger banks offer their clientele to undergo a know-your-customers (KYC) approach and open a banking account without a mandatory appointment in a bank’s office. It’s also possible to issue a credit card remote and manage it afterward with just a few clicks on their smartphone. 

Cross-border payments are becoming increasingly more accessible via revolutionary services such as Swift. Nearly 50% of cross-border transactions made via Swift GPI are credited within 30 minutes, and around 40% in under 10. 

Digital banking nowadays also includes personal finance management to help customers analyze their financial habits and spending analysis. Not to mention the services younger people have already gotten used to, like paying their phone and utility bills or topping up their public transportation cards via such apps. 

Cash-back is also one of the most valuable features that shape customers’ expectations in a way that helps people save money from buying services or goods from banks’ retail partners.  

Finally, amidst the vast majority of valuable features that challenger banks and fintech services include, you can even see an option to buy cryptocurrencies and stocks via the application. This is useful for new and seasoned investors and helps people keep everything safely tucked under their fingertips.

It’s worth noting that fintech startups always develop new ideas, making previously slow market pacing. New ways to identify customers, issue a loan, and make cross-border transactions – each new year brings more innovation. 

Today’s customers won’t be satisfied with Internet banking; they seek more unique and beneficial experiences with faster, automated, and transparent operations.

The Shift in Customer Expectations

As banking technology evolves, so do customer expectations. Today’s customers demand seamless and secure digital experiences that many tech companies offer. The way fintech reshapes the customers’ expectations is directly tied to what more fintech can offer compared to traditional banking. Since incumbent banks already have an established clientele, challengers must work hard to get users interested in their services. Hence, they offer fast and seamless services of top-notch quality, each technology ahead of the other. How does it shape the market? Let’s dissect this question and find out. 

  1. Security. With the rise of digital transactions, customers have become aware of how much their data is available to banks. Users now expect banks to adopt robust cybersecurity measures and ensure their personal and financial information privacy.
  2. Speed. What I’ve mentioned before – the pace of cross-border payments – has touched all areas of banking operations. Now, it takes minutes to complete transactions for users of challenger banks. Hence they expect traditional banks to adopt the same agility. 
  3. Flexibility. Not only does fintech automate the workflow of financial services, but it also eliminates the need for human intervention, which makes the services available 24/7 via any accessible device.
  4. Wider coverage. Fintech firms can extend their services to the people and companies typically underserved by traditional brick-and-mortar banking. Among them can be less developed layers of the population (e.g., many fintech services offer debit cards for teenagers under their parental control) and SMEs with non-audited accounts. So, today’s bank customers expect to be included, longing for the same quality of customer service for everyone.
  5. Innovativeness. Fintechs are smaller and more flexible with higher technology adoption, which makes them more liable in today’s fast-shaping market. With new solutions like that impacting banking in various ways, customers want more of everything – engagement provided by gamification, the safety of cybersecurity, and innovative features such as management of different card accounts, investment portfolios, and even robotic advisors. 

But why are brick-and-mortar banks so slow with new technology adoption? There are numerous reasons, above all, the rigidity of their organizational structure, outdated technologies, and a vast amount of departments unable to mitigate the change.

Why Banks are Slow to Adopt New Technologies

Banks aren’t rigid for no reason – they have formed structures needed for the security and comfort of their operation. However, nowadays, strict management and low flexibility have become a downside for most of them. In my opinion, these are the primary reasons why traditional banks struggle with new techs. 

  1. The rooted usage of outdated technologies. Some traditional banks use COBOL – an obsolete but feature-rich programming language. Many of them use monolith architecture, making it hard to implement new services and products.  Maintaining those systems can be quite a struggle, so many banks can spend 60% to 80% of their budget to ensure they function properly. In these conditions, innovations stay out of the picture as an expensive solution that is better to be executed later. Traditional banks also often use monolith software architecture, which, compared to microservices, makes integrating new features more cumbersome and expensive.
  2. Inability to integrate with fintech. Many traditional banks use outdated technologies like Legacy systems and monolith architecture, which makes them unable to partner with various fintech businesses and vendors. Customers, in turn, expect to get more valuable wide-range services, so integrations become a must. Traditional banks must learn to cooperate with fintech instead of treating them like competitors.
  3. Customer experience. The above leads us to the most vital miss in traditional banks’ workflow – they overlook customers’ experience. Internet banking isn’t enough for modern users. Now they want to be able to open a bank account via the app on their smartphone, transfer money in the blink of an eye, verify customers in a few seconds via the KYC process, access cashback and e-currencies, issue a card, and solve any problem in a support chat anytime anywhere.

So, despite the evident benefits of digitalization, many traditional banks need to be faster to embrace these new technologies. Wrapping it up, one of the primary reasons is the significant investment required to upgrade their systems and infrastructure. Brick-and-mortar establishments find it challenging to transition to digital platforms seamlessly.

Steps to Gain Customers and Build Trust 

Nowadays, digitalization isn’t driven by the idea that others don’t have technologies. True transformation requires banks to look at their challenges from a fresh perspective. Banks need to focus their energy on what differentiates them, understanding where it’s valuable to build the technology themselves and where it’s better to buy. Some third parties can offer services integrated seamlessly into the workflow and automate mundane tasks, drastically improving customer experience. 

Don’t get me wrong; incumbents are still widespread and trusted by many. However, the trust levels are shifting, with more and more new adult people preferring fintech over traditional banks. 

Trust level among users

As you can see on the graph above, in 2021, more people aged 18 to 44 preferred fintech companies over banks in the US. So, how can the traditional banking sector retain customers? The white-label solutions, such as Fintech Core created by DashDevs, can be explicitly helpful. Let’s look at how exactly Fintech Core can help banks. 

  1. Time. With such competitiveness, incumbents need to be able to ride the wave. So, if you have your thoughts on digitalization, quicken time-to-market and propose groundbreaking ideas to your customers before they turn elsewhere. Solutions like Fintech Core can support your digital transformation with its ready-to-use modules. This can accelerate your time-to-market and help you launch in two months. Among its modules that you can use right from the start are KYC&KYB, AML, general ledger, back office, transaction, banking accounts, card, FX, and cross-border orchestration. 
  2. Cost efficiency. Custom solutions often take a lot of time to create, making them expensive. If this is enough of a downside for a bank, they would be stuck with resource-draining obsolete technologies. Thankfully, Fintech Core is easy to work with since it already has a banking core, and hence, your solution doesn’t need to be created from scratch.
  3. Sharp technology edge. Scalability can be a significant issue for traditional banks that go digital. Scalable architecture, integration with different third-party vendors, and launching to other geographic markets get all too complicated with a monolith and non-scalable architecture. Fintech Core can integrate with over 70 vendors and help you customize your banking processes. Fintech Core was created by a company that launched 20 digital banking initiatives for clients on four continents, pumped with real hands-on experience and taking every detail into account.
  4. Compliance with regulations. Launching a new banking application can take time since it’s imperative to consider all regulations. Our Fintech Core complies with PCI and DSS and is ready to be certified after development. 


In today’s digital age, customer expectations have evolved, and banks must adapt to meet their needs. By investing in technology, prioritizing cybersecurity, and offering personalized experiences, banks can retain existing customers, attract new ones, and build lasting trust in this increasingly digital world. The key to success lies in understanding and embracing the transformative power of technology to shape the future of banking.

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