Three Lessons Banks Can Learn From the Craft Beer Revolution
I recently had the pleasure of hosting a craft beer tasting for Zafin employees. It was the perfect opportunity for team building, camaraderie and, well, drinking great beer.
But it got me thinking — there’s actually a lot of similarity between the beer and financial industries. Most specifically, in the paradigm shift that occurred when craft beer came onto the scene in a big way.
In the mid 2000s, the North American craft beer scene exploded. Where once domestic lagers dominated the taps at local pubs, now new (and often weird) beers were available at competitive prices. Unsurprisingly, the beer drinking crowd eagerly turned to these novel brews after generations of boring yellow suds. Craft beer remains in ascendancy, and big beer companies are scrambling to preserve their market share.
Banking is experiencing an eerily similar disruption. For centuries, establishment financial industries have been the only game in town in the same way you had a choice between a Budweiser, Coors, Molson or Miller. Different logo…basically the same thing. And then digital banks showed up, and everything is beginning to change.
There’s a ton banks can learn about handling this kind of disruption from the craft beer revolution. Here’s three lessons financial institutions should definitely pay attention to:
1. Ignoring It Won’t Make the Problem Go Away
Big beer had every opportunity to quash — or alternatively own — the craft beer movement. In North America, large domestic breweries controlled the vast majority of raw materials and dominated the distribution network. This was especially profound in Ontario, where The Beer Store board (one of two entities even allowed to sell beer) was completely controlled by massive beer conglomerates. The oligopoly was — in theory — rock solid. So why bother with the little independents?
But then market share began to get gobbled up. What started as less than 1% grew to 5% and then 8% — now it sits around 13% in North America. And that forced big beer to really take notice.
Banks are in a similar position right now. Their global domination of retail banking means they can really dictate the market — if they act. Digital banks are springing up across the world, offering competitive fees and rates to their customers, facilitated by lower overhead costs. These “craft” banks are appealing for the same reason craft beer is — they’re tailored to more specific “segment of one” customer tastes, eschewing the one-size-fits all model of yesteryear.
While big beer sat on their hands and watched an eighth of the market slip away (and losing more every year) banks have a chance to adapt to changing market tastes.
2. Embracing is More Effective Than Antagonizing
Smarmy attitudes of superiority rarely serve companies well, and big beer learned this the hard way. Budweiser’s infamous Super Bowl ad from a few years back took shots at craft beer for being pretentious and frilly — an obvious attempt to discredit the rising popularity. Except it had almost an inverse effect, solidifying the budding camaraderie of independent brewers and unifying a cause against big beer.
As far as I know, the major banks have yet to pay millions for commercials discrediting digital banks. And rather than taking that tact, opting to embrace the rising trend in craft banking will certainly yield more desirable results.
In Canada, the success of a digital bank like Tangerine is the perfect example. Owned by the massive Tier 1 Scotiabank, Tangerine is custom tailored to the digital market, and has been met with rave reviews from its customers. Rather than fighting against disruption, Scotiabank capitalized on an opportunity and is at the forefront of digital banking in Canada.
Banks should take heed of the pitfalls big beer experienced. Unifying a large market segment against you is far less effective than courting their business.
3. Collaboration is a Key to Success
Not every big beer company met with failure in their attempt to crack the craft beer code. Way back in 2005, Molson acquired the small craft brewery called Creemore Springs. It was a very amenable takeover. Rather than conform the brewery to Molson’s rigid standards, Creemore was allowed nearly absolute autonomy and continue to produce excellent beer.
Similarly, when Labatt acquired Mill Street brewery in 2015, it was on the condition that Mill Street continue to make beer the way they’d traditionally found success with. Eschewing hostility in favour of a collaboration allowed big beer to start taking a slice of the growing craft pie.
When it comes to craft banking, large financial institutions don’t need to outright buy up digital banks and startups. FinTech partnerships allow for the same benefits, for far less cost. Like a brewery collaboration, banks working with tech companies will allow for excellent product development that caters to a more discerning, craft-conscious crowd.
Are you ready to apply some of the lessons learned from craft beer to your bank? Don’t wait — get in touch with us today and begin your institutions digital transformation.
Zafin (@zafin) is a leading financial technology provider that enables banks to form richer, more personalized client relationships. Built from the ground up for financial services, its platform empowers banks to enhance revenue and operational efficiency. Founded in 2002, Zafin sits among North America’s top FinTech companies, and is trusted by retail and corporate units at some of the largest banks worldwide. Headquartered in Toronto with global offices, Zafin has a proven track record with a 100 percent client retention rate as validation.
Cam is the Digital Communications and Marketing Coordinator at Zafin. With a background in journalism and a passion for blogging, Cam strives to tell compelling digital stories. At Zafin he will share the latest trends and news in the FinTech world, and share Zafin’s role as leader in the industry. Follow him on Twitter @CamSmoth