Most millennials now consider such a personalized experience from a financial company to be as valuable as its products and services. A quarter of the US population comprise this demographic, so incumbent banks lose big if they fail to “get” these people. Even if they do, millennials will bolt if they experience geriatric and sclerotic service. With a few keystrokes, they’ll switch — to a fintech.

You’re doubtless familiar with this term — a “fintech” is a financial company with such advanced technology and business practices to automate and improve financial services that it is disrupting less innovative traditional banks. According to Business Research Company, the fintech market has exploded to $309.98 billion with a very robust CAGR of 25% through the end of this year. More than 18,000 fintech startups launched during this period (Statista). That’s a phenomenal number.

With fintechs, users perform most common banking activities — opening and managing accounts, making payments, transferring funds, getting loans, getting credit cards and investment consultations — anytime/anywhere by smartphone or wearable. Fintechs are Net-native — as virtual businesses they don’t have brick-and-mortar branches, so their operations are lean, their org structures flat and their infrastructures agile. They leverage tech like AI, ML and cloud to speed and scale service and eliminate human mistakes. What they save through innovation there, they devote to personalized marketing and customer service. This is where fintechs excel.

With sophisticated omnichannel marketing campaigns, fintechs can interact with prospects at the most opportune times in the customer’s buying journey. They also proactively provide recommendations of other services relevant to customers’ present product usage and behavior. They appeal to millennials because this dominant demographic is Net-savvy with very high expectations, and key among them is dealing with a customer-centric bank.

That said, customers of all stripes are increasingly drawn to fintech products because they’re fast, low-cost, easy-to-use and convenient. Opening an account online takes minutes, getting a loan is almost as fast, doing a trade is instantaneous. Fintechs are also less tightly regulated than banks, so they are flexible and can easily modify tech or service to react to market exigencies.

Incumbent banks historically have had only one advantage: trust. Customers trusted regulated and proven banks more than they did newer unproven fintechs with their money. At least, they used to. As fintechs proliferated, they have proven their stability over time and earned the trust of customers. Even for new fintechs, their ability to deliver better service trumps trust — and incumbent banks’ failure to adapt their services promptly to customer needs trumps it further. With fintechs, customers have more leverage than with banks — and for less cost and trouble.

Now that fintechs are established, other industries are embedding fintech capabilities into their products. Fintech has made corporate travel much easier, for instance. Travel companies have embedded fintech via APIs to automate payment and lending and even insurance right from the travel app. Banks, therefore, now have new competition from fintech-embedded travel and tourism but also from all manner of other fintech-embedded companies. For instance, retailers now commonly make loans to merchants, so merchants don’t have to go through banks. You can now get fintech capabilities from many companies, inluding telcos, insurance companies, and car manufacturers. Just about any company can become fintech-embedded.

To remain competitive, banks themselves have bought or partnered with fintechs instead of trying to build those capabilities. The bigger the bank, the more likely it’s partnered with one or more fintechs. Size matters. Banks’ legacy infrastructure is often dated, so processes are far from friction-free, and data is siloed there. Most banks also have trouble identifying new customers and analyzing their big data for useful insights. They are modernizing their front ends to stave off the fintech competition while they gradually integrate them with, and modernize, their legacy systems, but these legacy systems are holding them back.

When banks and fintechs partner, they necessarily enter into a coopetition situation — banks benefit from fintechs’ technology and fintechs in turn get access to banks’ customers, big data and credibility. Both lose some of their competitive advantage by sacrificing what uniquely distinguishes them, but they win much more — they can scale faster and win new customers by partnering than they could by trying themselves.

We have moved from a services economy to an experience economy dominated by millennials who crave meaningful or at least exciting experiences more than expensive brands of products and services. Their spending on experiences is probably also due to the fact that materialism is not an option — they generally can’t afford the big house and two cars that previous generations could. However, because they spend so much time online, they also inordinately value offline live experiences. Ironically, they seem to get great pleasure from sharing memories of those experiences back online over social media. Memorable experiences are meaningful ones, and providing meaning is part of fintechs’ value proposition because it’s part of millennials’ constitution.

Banks like Capital One are staging live experiences that make their brand of banking more palatable. Its branches resemble coffee houses more than traditional bank branches. They offer coffee, food, a hip setting with free wi-fi and concierges who greet and guide customers throughout the bank to services they might be interested in. Their fintech capabilities extend this physical experience into a virtual one by then customizing a banking package for each customer instead of forcing her to choose fixed services from a limited menu.

Banks that take a utilitarian approach with standardized services that fail to provide pleasurable and personalized experiences just lose millennials. Millennials were raised on fingertip finance, can switch to banks with better services online in seconds, and have little brand loyalty.

A surprising fact about millennials is that about half admit they want an emotional connection with their bank. They want banks to be like families that honor their values — to be sentient and always engaged. To hyper-reinforce customer trust, fintechs promote activities that stir millennials’ emotions: with contributions to the community, charities, continuing education for employees and so forth. The appearance of benevolence pays off — it directly impacts customer churn.

Banks, companies with embedded fintech as well as fintechs themselves, of course, each want to own the customer relationship. The winner will be the one that best personalizes its experience by meeting millennials’ unique wants and needs throughout their lifetimes. While each of these businesses pursues a complete view of the customer, the customer in turn is best served by having a unified view across all lines of business they deal with like checking and savings accounts, credit cards, mortgages, lending, brokerage account, etc. The customer then gets an easily navigable window displaying all products and services without repeatedly exiting and entering apps.

Most millennials rate personalization as fintechs’ most desirable capability. Fintechs enhance the 24x7 remote experience in several ways.

Attend to data. Access to and analysis of customer data is essential. For instance, if a fintech knows the age of a customer’s car, it can offer him a car loan. Banks typically accrue lots of data over the course of dealing with a customer. However, often they can’t locate it because it’s siloed in legacy apps; if they can find it, it might not be reliable — current and accurate; they can’t determine reliability without data analytics; and without analytics they can’t massage the data in a sophisticated way so it yields insights about the customer they can act on to better serve or sell the customer. Fintechs, by contrast, can deliver on all these counts so, whereas banks have data, fintechs can better mine it to develop customized products and services.

Use AI and ML to present sell and serve opportunities. These technologies automatically track and analyze customer behavior. The fintech can trace how customers navigate its website then prompt them with serve and sell offers at various touch points.

Provide omnichannel collaboration. Serve and sell the customers in ways they communicate over multiple channels like email, instant messaging, chatbots, and so forth.

Offer a unified view of customer’s involvement across lines of business. Often multiple finance personnel are involved in a customer’s interaction. Fintechs make it easy for the customer to simultaneously interact with people in different lines of business seamlessly in real time through a unified view.

Customize portfolios. Fintechs don’t make the customer fit a fixed portfolio model – they customize portfolios according to customers’ requirements, so service is more personalized.

Offer robo-advising so more customers can invest in the market in ways unique to them. Robo-advising lets more customers get investment advice for lower fees and minimum account balances according to a portfolio management algorithm. This allows automated investing according to customers’ preferences and risk tolerance.

The fintech value proposition is so irresistible that most banks are pursuing partnerships. Meanwhile, fintechs’ advanced technology enhances or automates so many banking services that it frees high-value personnel to concentrate on more complicated high-margin investment and other services. So they win on numbers, as well as quality, of customers.