Mahi Sall, Advisor, Fintech-Bank Partnerships, Payments and Financial Inclusivity
January 25th, 2023
Mahi Sall is the CEO & Founder of FinXpair, a Berlin-based strategic advisory boutique firm focu[...]
Fintech Firms Fight Friction To Disrupt Banks
Forbes | | Jun 1, 2020
Who is the biggest mortgage lender in the U.S.? If you guessed Wells Fargo, JP Morgan Chase, or Bank of America, you’d be wrong. Late in 2017, Quicken Loans passed Wells Fargo (NYSE: WFC) to become the highest volume mortgage lender.
As the two firms continue to vie for the top spot, the difference between them is apparent. Wells Fargo is a traditional bank, tracing its roots to 1852 and today operating more than 8,000 branches. Quicken Loans dates only to 1985 and operates no branches.
See: How is Amazon disrupting the financial services sector?
What accounts for Quicken Loans surging ahead of traditional competitors and their long-established customer relationships? The explanation is, quite literally, simple. Quicken’s Rocket Mortgage operation took a complex, intimidating process and made it easy.
In my book Friction, I show how brands like Amazon and Uber, as well as smaller niche players, disrupted their competition by creating an effortless customer experience. This is the exact playbook used by Rocket.
Rocket Mortgage uses the slogan, "Push button. Get Mortgage." They claim a consumer can get approved in as little as eight minutes. (I’ve spent longer than that sitting in a branch waiting to speak to a manager.)
A key part of making things simple and fast is technology. Quicken Loans introduced online applications early in its history. They were among the first to have a mobile app that let customers apply for a mortgage on their phone. They further reduce effort by importing data and pre-filling forms whenever possible.
Quicken founder Dan Gilbert, quoted by Samantha Sharf, explains his firm’s strategy:
"Our product is sort of a commodity. There is not that much different between mortgages, but there is a difference in how that mortgage is delivered and that experience to the customer."
An Easy Customer Experience Win
One might thing that mobile apps, computers screens, and call centers might generate high volume but diminish customer experience. Don’t people prefer dealing with humans, like the friendly branch manager or helpful loan specialist at their neighborhood bank?
See: Dealing with a crisis: FinTech versus Bank
Apparently the value of human contact pales in comparison to minimizing the customer’s effort. For ten years, Quicken Loans has topped the J. D. Powers customer satisfaction survey for mortgage origination. The firm is not only the highest volume mortgage lender, they have the most satisfied customers.
Mortgage shoppers aren’t looking for delight. They don’t want to be “wowed” or even pleasantly surprised. They want to get through a confusing, often bureaucratic process as quickly and easily as possible.
Digital-First vs. Digital Afterthought
A few years ago, I consulted on a project for a large, traditional financial company. Their product was offered both by long-established competitors and fintech startups. I was struck by the difference in approach - the big firm’s website was hard to navigate, made compliance disclosures prominent enough to be frightening, and had never been optimized for conversion.
See: How to create high-value customer interactions and win in the Low Touch Economy
The fintech firm sites, in contrast, were uniformly intuitive and easy to use. They included legally required disclosures, but presented the information in a way that minimized their impact on the customer psyche. Their modern designs inspired trust. The next step in any process was always obvious.
When there is a huge contrast in customer experience, a trusted brand alone isn’t enough to win the customer’s business.
Counting Clicks
Banks have improved their digital offerings in recent years, but many still lag behind their fintech counterparts. UK-based user experience expert Peter Ramsey just published what happened when he opened accounts at a dozen different financial firms.
Unsurprisingly, Ramsey’s data showed that fintech firms, on average, make opening account far easier than their traditional brethren. Ramsey counted the number of clicks required to open an account and found they varied from a low of 24 for Revolut to an astounding 120 for first direct.
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