The global banking and financial services industries have been subject to significant disruption in recent years, but where does fintech go next?
The arrival of challenger banks, new payment systems and ‘robo-advice’ has shaken up sleepy incumbents. Has this disruption largely played out or does fintech still have new worlds to conquer?
Fintechs have certainly built scale and made a real impact, but they still have a relatively small market share.
People are only just recognising that they can trust these new names. With banking, for example, some customers use accounts with the challenger banks as an addition to their main banking relationships.
Reports show consumers are increasingly using multiple platforms for their financial services needs, with 36% of Chinese consumers using five or more providers, followed by 26% in the UK and 22% in Japan.1
They may do this because their children use different platforms and it’s easy to transfer money or they may use payment apps for holidays. There is certainly room for challenger banks to become the preferred provider.
Owning the whole relationship
The same is true for business banking. Fintech providers in this area are moving into tax and accounting. They have the breadth to own the whole customer relationship, not just a part, a process likely to be accelerated in the UK, for example, by the Government’s Making Tax Digital initiative.
The attitude of incumbent businesses reflects this potential. After a period of apparent complacency they’re now feeling extremely vulnerable to the rise of fintech. Some are striking partnerships, others trying to compete.
They recognise that fintechs are far more agile. Fintechs, for their part, see agility as their greatest strength and are increasingly trying to remain independent.
There are also new parts of the financial services industry that are ripe for disruption. Every part of the industry believes it can’t be disrupted, until it is. A decade ago, the banking institutions looked untouchable. The global financial crisis blew that away
Next big idea
Equally, it’s not always easy to know what the client wants. Henry Ford said before the rise of the motor car: “If I had asked people what they wanted, they would have said faster horses.”
That said, some areas are harder to disrupt. Capital markets, for example, are more resistant to change. However, there is a lot going on behind the scenes across the world, with the brightest minds striving to come up with the next big idea.
Fintech has many more worlds left to conquer. As society changes, financial services needs to change with it. This is difficult for businesses with a raft of legacy systems – but fintech will pave the way.
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Date: October 2019