At this year's “Harnessing Fintech Innovation in Retail Banking” event in London, we discussed a lot about whether banks would learn from or suffer at the hands of "GAFAA".
Companies like Google, Apple, Facebook, Amazon and Alibaba ("GAFAA") are leading customer expectations of almost everything digital. These always on, globally connected, consumer-centric mega-companies are not only changing the digital landscape but exploit the trust equation that allows aggregation or disintermediation plays - and they have the power to influence the way that banking customers’ expectations are set and met.
An article published by Piercarlo Gera from Accenture in June last year talked about the emergence of these firms from Retail, Entertainment and Travel to include payment services and the inference was clear. If payments can be made easy by global online firms like these, then what’s to stop them moving from payments into more traditional forms of banking?
The answer, quite simply, is almost nothing.
Sure they'll need a Banking License for certain services, but they have the size and speed to overcome that either aquisitively or organically. The risk therefore of a bank doing nothing is potentially disastrous and isn’t much of a practical option.
Gera asks “Should FSI's go it alone or partner with Financial Technology ("FinTech") providers?”. That question was asked and answered at the event last week and resoundingly concluded that partnering is the most viable approach, as summarised in some of our other blogs. FinTechs can massively accelerate traditional banks’ approaches to IT re-development and ensure that the banks stay relevant to the market.
Some Challenger banks and also High Street names like Barclays are making great strides forward in terms of their progress on aligning to different client digital journeys but there’s still some way to go. It’s often said that big ships take time to turn and while this is true of banks as well as other large firms, failure to turn might also see them dashed on the rocks of the digital seas. Large ships sink quickly if they fail to adapt to the prevailing conditions.
Is less regulation in banking the answer?
Regulation often impedes both traditional and challenger banks – just as it does in many other industries. We don’t advocate a relaxation of regulations or the checks and balances that sit behind them, but it is clear that banks, FinTechs and regulators need to work closely to accelerate time to market with new innovations and systems.
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