Cause and Effect: If you build it, will they come?

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Many financial institutions assume that digital banking is lucrative because the most valuable customers happen to bank online. While there is certainly a correlation between online bankers and higher profitability, quantitative evidence suggests that...

Intuit 2020 Report: The Future of Financial Services

April 11, 2011
/   Insights

Today, Intuit released the latest edition of the Intuit 2020 report, Intuit 2020 Report: The Future of Financial Services, which identifies and examines four key trend areas that will  transform the financial services industry...

Fast Facts: Student Loans

January 22, 2013
/   Insights

The Financial Services Roundtable recently released another iteration of its Fast Facts, reliable, bullet-point research about issues facing the financial services industry. Topics span TARP, Dodd-Frank, insurance, lending, retirement savings and more.  Below are some updated Fast...

The Top 10 Trends in the Digital Banking Industry

December 18, 2013
/   Spotlight

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Making Banking Fun: Gamification in Financial Services

August 5, 2013
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Recently, the Banking.com team sat in on American Banker’s webinar, “Gamification in Financial Services: Five Proven Ways to Get an Edge,” which shared how leading brands in financial services have applied gamification to reach...

Technology M&As: The Beats Go On

May 29, 2014
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The ongoing fascination with Apple’s $3 billion purchase of Beats Electronics is entirely understandable, because it’s a cool story. However, it also says a lot about what’s going on between finance and tech.

What We’re Reading

May 5, 2011
/   Spotlight

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Small Business: Perception vs. Reality

November 21, 2012
/   Insights

In the most recent election cycle, like most others before it, the one sector of the economy that got the most attention was small business.  This is the future, we were told by every...

What We’re Reading: Thanksgiving Edition

November 22, 2012
/   Spotlight

Below are interesting stories the Banking.com staff has been reading over the past week. What have you been reading? Let us know in the comments section below or Tweet @bankingdotcom. Mobile Thursday? Plans for Thanksgiving...

The disruption caused recently by the emergence of a wide range of new financial technology (Fintech) players has been a huge jolt for the banking sector, and reminded traditional players that they cannot afford to be complacent in the face of these competitors.

The key theme behind many of these new developments is the notion of convenience. In a world where digital technology such as 4G networks and smartphones have engendered an attitude of always-on connectivity, the idea of having to wait several working days for banking processes to complete is unacceptable to many people.

For some consumers, even the idea of having to carry a payment card seems outdated when they can manage every other aspect of their lives through their phone.

The rise of the challengers

Therefore, it’s understandable why so many people are turning to alternative options to traditional banks, and this is expected to have a significant impact on legacy brands.

For instance, an analysis by Goldman Sachs estimates that as much as $4.7 trillion in revenue for traditional financial services offerings is at risk as a result of the new breed of Fintech startups.

The BBC notes the encroachment of these players on traditional banks is only set to increase in the coming years, particularly as new regulations favor startups. In the EU, for instance, the implementation of the Payment Services Directive 2 rules in 2018 will likely lead to more competition by forcing banks to open up their IT systems to new entrants.

Therefore, banks that do not respond to this changing environment can expect to be left behind. For instance, any financial institution that does not offer a mobile banking service will be marginalised.

An opportunity for collaboration

However, not all legacy banks are viewing Fintech startups as a threat to their established revenue streams – some are actively seeking to partner with these players in the hopes of improving their own innovations and working together to deliver services that customers really want.

Research by Efma notes that in 2015, 43 per cent of banks were positive or very positive about working with startups as business partners, and the effect such collaborations has can be significant. Over two-thirds of banks stated this has a high impact on their ability to deliver more innovative solutions, while more than half agree it has a high impact on the speed to market of their innovations.

Other institutions are looking to invest directly in Fintech startups in order to add their innovations to their own portfolios. For instance, Efma notes that Spanish bank BBVA has acquired user experience and design company Spring Studio to improve its offerings.

BBVA said: “The importance of user experience and design is growing exponentially in banking and with Spring Studio we can move into fast-forward mode with our design ambitions.”

An effective approach?

However, in order for such collaborations or investments to be successful, banks will need to have a clear strategy about how they plan to incorporate the technology and solutions they gain access to.

Frost and Sullivan analyst Gareth Mellon told the BBC that many of these efforts are purely “defensive strategies” that have proven difficult to integrate with existing business models. As a result, there is still uncertainty about how effective such partnerships will be – and in many cases, new startups will need the help of legacy banks.

“While Fintechs have brought heightened innovation, they remain limited in their scope and, in many ways, are forced to rely upon the established players to ensure market adoption,” he said.

Andy Brown, Marketing Director Payments at NCR Corporation, has nearly 30 years’ experience in e-payment systems both from the delivery and support of systems in the Far East and Europe and in the product management and marketing perspectives. Based in the UK, Andy is responsible for the marketing for NCR’s payments solutions.

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Compelling voices and contributed content from around the web

James W. Gabberty

Gabberty is a professor of information systems at Pace University in New York City. An alumnus of the Massachusetts Institute of Technology and New York University Polytechnic Institute, he has served as an expert witness in telecommunication and information security at the federal and state levels and holds numerous certifications from SANS & ISACA.

Marisa Mann

Marisa Mann brings over 15 years of experience in consulting and financial services industries to the Solstice team, working on large scale enterprise initiatives across many technologies, including specializing in the digital space – Internet and mobile. Mann is passionate about mobile and the endless possibilities for the enterprise, delivering business value through strong brand recognition and driving to excellence in the consumer experience. Prior to Solstice, Mann worked at JP Morgan Chase, Diamond Management and Technology Consultants, Washington Mutual, Inc, and Accenture.

Zachary Ehrlich

25-year-old writer, and as a native San Franciscan, I am unreasonably loyal to Bank of America, if only for their superhero-like origin story, involving the 1906 earthquake and Italian fruit vendors.

Brad Strothkamp

http://www.forrester.com/rb/analyst/brad_strothkamp