When new technology companies began developing innovative business models and applications in the arena of finance, many commentators suggested how the industry was at risk of a revolution. Banking was, all things considered, ripe for disruption.
As a slow-moving, conservative industry which has a poor good name for customer care, many doubted that this could possibly conserve the digital transformation on offer by these new fintech companies.
“A several years ago people were expecting that fintech would completely revolutionise this is a and take most of the banks’ customers away,” says Ben Robinson, head of strategy and the self-service digital store known as Marketplace at enterprise software specialist Temenos.
“That, however, hasn’t happened. In 2009 the Economist Intelligence Unit learned that fintech companies had thus far captured a place share of only about 2%.”
If one investigates that statistic alone, one might express that the disruption attributable to fintech companies has therefore not been material. But Robinson believes it would be an error in judgment for taking this simplistic view.
“For a start, we may mention that fintech continues to emerging,” he argues. “So 2% could easily turn into much larger number from a short time. We all do also actually have some large fintech companies, like PayPal.”
Secondly, the indirect impact of fintech over the banking industry has become significant.
“Fintech has place a large amount of pressure on banks to increase the individual experience, reduce friction and reduce prices,” Robinson says. “The amount of cash that banks have the ability to make in areas like forex or remittances is shrinking considerably because they are under pressure. While men and women are not moving wholesale to new alternatives, banks have to lower their spreads to live competitive.”
Finally, there has been a big change in the approach of a lot of fintech companies. Rather then looking to compete against banks with their own solutions, there’re instead working together with them. That is a big trend in areas like security and automation.
While this represents a whole new dynamic in the profession, there are often substantial differences between how banks and fintech companies operate, that means these partnerships will often be difficult.
“We recently surveyed numerous companies as part of a Temenos report into how fintech has been evolving, and the majority of fintech companies think banks are getting to be more happy to talk with them,” Robinson notes. “However, they don’t see much improvement for their power to deploy fintech solutions.”
The effect can be that almost no solutions help it become into production because ability of banks to deploy them hasn’t kept up with their willingness to do this.
“As perhaps the study, we asked banks just what challenges are of using the services of fintech companies, so they boil as a result of certain things,” Robinson explains. “The first is discovering the right ones. There are actually something like 20 000 fintech companies these days, so it will be hard for banks to reduce with the noise and complete the market screening to understand the ones that they have to work with.
“The other challenge is the fact that as soon as they have realized the proper fintech company, they will steer them through procurement, through IT security, through legal