Christine Barry, research director at Aite Group, told Computerworld, " I think new competitors in the market are good for the industry. They are forcing banks to evolve their strategies and broaden product offerings or risk having their online sites viewed as simply a place to check balances and transfer funds. The customers will ultimately benefit from better bank offerings."
And in a press release, Ralph Dangelmaier, president of Global Markets and Services at ACI Worldwide, said, "Consumers expect to shop and transact anywhere, at anytime, making mobile the hottest area of opportunity for financial institutions, processors and retailers today." He urged banks to plan strategically to make mobile part of their overall channel strategy, alongside ATMs, point of service, branch and online banking. They should "implement innovative mobile services," he said.
To achieve this fast, some banks are buying their way into partnerships with technology firms. HSBC, UBS and Barclays are increasing investment in the financial technology (fintech) sector. Deutsche Bank plans to launch an online platform through which fintech startups can pitch their ideas. Such partnerships let banks focus on the fiscal infrastructure while their agile fintech "frenemies" develop new products and services.
The pace of change is rapid and has inherent dangers. Speaking in June, Financial Conduct Authority chief executive Martin Wheatley warned bankers that the pace of technological change will be of an "entirely different order" to anything seen before, warning that "the concern is technology within financial services becomes a sort of Wild West." After all, you have to wonder whether the level of regulation applied to the new fintech players will match the oversight now laid on the banks. How effectively can global regulation ensure that these new financial players offer the same level of protection to a customer's financial assets?
Perhaps it's too early to call time on the banking system. Banks do have some good advantages to help them survive the smartphone disruption:
- People already trust banks with money and are less certain of new incumbents.
- Banks can offer a single entity (online, physical) for banking transactions.
- Banks can leverage their existing scale to offer more competitive pricing models than new industry arrivals.
"Not all banks will move quickly, though, so there will be opportunities for banks to differentiate themselves," said Aite Group's Barry. "As such, there may be changes in market share."
That's an understatement. In my opinion, the pace and scale of change is more rapid than most banks are inherently capable of navigating. Not only this, but banking customers are less loyal to their banks than ever before, having been denied credit, foreclosed against and made to endure global austerity measures ostensibly to support relief efforts to keep the banks in business. All these factors mean we are entering a period of major consolidation and uncertainty across the global banking industry, which will bring a wave of uncertainty across the global economy with which these entities are so entwined.
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