There’s no shortage of opinions on how the banking industry will be reshaped. Quite popular, are predictions of banks relegated to boring (regulated) infrastructure & verification services, augmented by a multitude of slick UX, machine-learned fintech players delighting impatient, ‘fed-up-with-the mediocre’ consumers.
In a previous post asking how we want to ‘Uberize’ (disrupt) banking, I touched on upcoming pressure on banks to open up their data, as well as the infrastructure transformation coming via adoption of the block chain.
My view has consistently remained that internal bureaucracy and service & technology-driven innovative threats notwithstanding, many banks will gradually adopt the innovations that temporarily bested them, and regain some lost ground. My first two fintech start-ups underestimated bank management inertia, the head to sand ratio, and speed at which fintech businesses would encroach on bank territory.
Central banks and regulators have helped fintech, either in some cases, by reasonable regulation, or in others, by taking their time to regulate. The most recent news in the US about Lending Club will be interpreted differently but will increase the discussion around protection, behaviour and best practice. Hopefully, avoiding burdensome box-ticking and focusing on principles that allow financial services to evolve and improve.
Back to bank digitization and upgrading the bank offering. Capgemini and EFMA published a retail banking report which included results of a survey of senior banking executives.
The graphic on the right summarizes how bankers perceive the threat.
The graphic on the left samples the likely mix of responses. Interestingly, more than 60% will build, buy or ignore.
Licencing/white-labelling online loan engines already started last year, as have referral partnerships and outright acquisitions of teams and technology.
Accenture recently published its report SME Banking 2020, summarizing the potential to unlock £8.5 million in new banking revenue from small and mid market customers. The source of the opportunity: “Delivering value-add products and services to small and medium-sized enterprises (SMEs)”.
It’s an interesting read, and echoes a theme I’ve long believed in – banks have the potential to play a bigger role in business success. If they get out of their own way!
The graphic on the left summarizes the sample pool’s response to what they historically looked for (or didn’t).
The graphic on the right, shows the response to what services they could find interesting, in a world of online financing, cloud accounting, payments & FX and B2B invoicing.
A recent report by BCG, echoes the need to reshape offerings to customers influenced by consumer services and ecommerce (e.g. Amazon). Recently, a European bank announced it was launching its own crowdfunding platform in partnership with the firm managing the national securities registry. The domestic context in this case is different to other markets, but the opportunity to roll out technology based finance matching to augment origination relationships and distribution teams will translate elsewhere.
It’s easy for banks to protect ‘cash cows’ and rationalize smaller agile innovators as marginal, but in the end, the banks that are able to cannibalize existing pricing and delivery models today to stay ahead of the innovation onslaught will gain.
I think we can expect to see many such announcements across the globe.