Last week I read a very interesting article on the outlook and future of Fintech. Interesting in that it had a very cynical tone from an executive with an extensive banking and banking technology background.
The executive goes on to recall the banking technological advances since the 80s: PC, Dial-up Modem, the first ATMs, EFT (Electronic Funds Transfer), EDI (Electronic Data Interchange), STP (Straight Through Processing), „Proximity Devices“ (aka NFC), and finally the advent of mobile phones. He takes on a very simplified view of mobile banking: „Mobile banking is simply putting your old Internet or online-banking onto your mobile as well“. In reality, mobile banking has evolved into „digital banking“. Thanks in part to the evolution within banking due to increased competition.
To paraphrase the executive, we are all still being taken for a ride by the banks while thinking all along that Fintech has revolutionized banking: … “on the subtle (and perhaps cynical) side, what the banks have succeeded in doing is getting you, the customer, to do all the work (previously done by bank tellers or trusty bank clerks) and they (the banks) are charging you for the ‘privilege’ of doing their dirty work. The ‘fintech’ revolution in its current incarnation as ‘digital banking’ has the bank’s technology loving customers (anyone under the age of 50) gladly doing all the work (essentially form filling and data capture) while the banks save oodles of money by no longer needing all those expensive, unreliable and ungrateful staff who really loved their careers. Now bank customers are doing all the work and are happy to pay for the ‘privilege’ in the sure knowledge that if they didn’t do it the bank would charge them even more than they currently do”.
Yes, we certainly move through phases. And the more we change the more we stay the same.
I certainly don’t agree. Fintech has taken the banking industry, laden with legacy systems, and allowed a lot of streamlining which has resulted in cost reduction and increased opportunity and efficiency.
The one valid point he makes that I agree with is the fact that we have found dozens of problems all solvable by the new technologies.
A while back I wrote an article, Is the involvement of banks in FinTech a Trojan Horse? in which I highlighted the way banks are reacting to the disruption caused by Fintech. Fintech represents a new revenue stream for the banks which are adopting a more opportunistic approach to dealing with technology innovation. What it really means in the long run is that banks are adapting to the changing financial services landscape. The competition and startups precipitated by the rise of Fintech are also indirectly helping banks create better, more convenient products and services for their customers.
So what the author of that article, Reflections of the fintech Revolution, fails to grasp is that technology is just a part of the revolution that’s under way, or has already taken place. So yes, the more the banking industry is disrupted by Fintech the more we benefit.The majority of banks have an asymmetric risk profile for innovation.Click To Tweet
Unlike Fintechs which have the luxury of starting all over again, banks face severe consequences. As such, banks cannot fully and in real-time embrace the technological revolution that’s facilitating Fintechs. It’s the legacy thought process and systems that have allowed Fintechs to disrupt every aspect of banking with freedom, pace, energy, adaptability and flexibility. With their focus on singular use case solutions, Fintechs have the ability and opportunity to think narrow and deep.
So the only question is: Can banks get their act together? Will legacy thought processes and systems prevent them from catching up with Fintechs?
Image credit ©Finacle