In Q2 2021, VC-backed fintech companies raised a record $30.8B, 30% more than the previous quarterly record. And some of the most promising startups who have taken advantage of these ascendant technologies—including SoFi, Upstart, and Root Insurance—have gone public in the last year, raising many more billions. As a result, these startups have deeper pockets than ever. And they are using that capital to wrestle away a larger and larger share of markets long dominated by large incumbent institutions. No wonder 88% of respondents from incumbent firms told PWC that they expect to market share to digital innovators.
To win over customers and investors alike, digital attackers like SoFi and Root have put all their efforts into digitizing traditional consumer-facing processes. As a result, they enable consumers to complete complex financial transactions in minutes rather than in days or weeks. Digitization also helps these startups keep operating costs very low relative to many incumbents. After all, all self-service transactions cost up to 99% less than those that require human intervention, Gartner estimates.
However, it is dangerous to write off the incumbents, as Bill Gates knows well. He predicted the demise of traditional financial institutions back in July 1994. Yet over the next 25 years, U.S. banks quadrupled their annual earnings from $51 billion to $221 billion, according to the FDIC.
Even in the age of fintech, large incumbents still enjoy “economies of scale and scope and network effects,” according to Bank of International Settlements (BIS) researchers. This gives them a competitive advantage across customer acquisition, compliance, capital access, and customer data, finds the BIS.
Still, financial services know they can’t rest on their laurels, especially as digitally savvy Gens Y and Z make up a larger percentage of the market. Already, 3-out-of-4 members of Gen Y prefer all-digital self-service to interactions. Even a solid majority of Baby Boomers and Gen Xers prefer transactions that they can complete on their own, as they are becoming less and less patient with less-than-instant results.
To fend off the fintech threat, large incumbents must do more to digitize consumer experiences. However, they first must overcome a number of structural disadvantages. While the startups have built underlying systems from the ground up with the goal of serving customers digitally, large incumbents have had to wrestle with disparate systems spread across sprawling infrastructures. Startups have also focused their entire organization on digital experiences, while incumbent institutions have a wider range of challenges that divide their focus. Finally, the security, compliance, and governance concerns at incumbent firms have also tended to favor the status quo, especially given the technical challenges involved in weaving together disparate backend systems.
A few years ago, these were all serious challenges to digitization, even at firms with deep pockets. Digital initiatives involved complex planning and long, painstaking, high-risk development projects.
But that was before the advent of enterprise-grade no-code. With an all-visual development environment like Unqork’s, even less experienced developers (Unqork calls them Creators) can quickly design and build customer-facing applications—there are no lines of code to write, edit, or interact with at all. Thanks to a plug-and-play approach to integration, they can even build applications that handle complex transactions involving disparate backend systems. As a result, development with Unqork’s no-code platform is “a minimum of three times faster and three times less expensive” than the company's previous approach, says James McGlennon, the CIO of insurance giant Liberty Mutual.
While many large firms are either purchasing or entering into partnerships with startups, or fintech providers themselves, they now have another option. Here are five ways no-code is turning incumbents into digital disruptors.