In recent years, an increasing number of established banks have begun to describe themselves in the language of technology companies. They invest in digital platforms, acquire fintech startups, create innovation labs and speak of agility, user experience and data-driven services.
But is this genuine transformation — or a strategic attempt to remain relevant while preserving traditional structures?
This article examines the forces behind the “shapeshifting” of banks, the opportunities and risks, and what it means for the future of financial services.
The shift is not just about new products, but a fundamentally different operating model.
Technology in Fintech 1.0 and disruption made banks stop and take notice but Fintech 2.0 is all about letting banks in and allowing them to have a stake in the space. However, during Fintech 1.0 a lot of banks were forced to make what most in the industry saw as knee-jerk decisions, adopting questionable strategies. Most banks are still following the same strategies.
Banks as “technology companies with a banking license”?
Quite a few bank CEOs and executives view their banks as “technology companies with a banking license.” Yes, it is not inconceivable that banks have a lot of developers.
Silicon Valley will be competing with us very soon. We are ready – JPMorgan, 2014
[clickToTweet tweet=”Can banks transform into real software companies? via @KevinMoseri” quote=”Can banks transform into real software companies? “]
Successful banks in the future will need to be “Fintech” companies as well – blending their financial services with specific technology aimed at their customers – Fidor Bank, 2015
Or should they even be trying? Executives may be tempted to pitch this idea to board members, but the reality is that banks have very little say (or non at all)anymore on how the standards for digital banking are defined. Fintech 2.0 has ensured that the playing field is in favor of Fintechs and not the banks.
So what should banks really be doing? Their focus should be on capturing and analyzing customer transactions with the new mobile channels and then pivoting towards a fully digital relationship. However, this is where the
C-Word
comes into play.
[clickToTweet tweet=”While Fintech 1.0 was all about disruption, Fintech 2.0 is about facilitating collaboration. ” quote=”While Fintech 1.0 was all about disruption, Fintech 2.0 is about facilitating collaboration. “]
If banks insist on shapeshifting into technology companies, and becoming banking platforms instead of an amalgamation of accounts and mortgage products, will they develop a corresponding ecosystem as part of a broader strategy? Would this be a transitional measure towards a more radical transformation? NO. Although banks absolutely need technology to survive today and grow tomorrow, they still need to be banks.
Bottom line is, customers don’t want banks!
Clearly there is a case for demanding the abolition of banking as we know it. Fintech has already proved that it’s not a utopian idea. However, would that require the abolition of the state of affairs that needs banking? The bottom line is, customers don’t want banks! They want what the bank can facilitate and that is “rocket fuel” for Fintech. But what does the banking system do that we actually need? Currently, banks perform a number of functional requirements: management of money, access to money and the ability to purchase things with credit. For a consumer, the primary goal is “buying something” easily, more conveniently, faster and cheaper. This means that “banking” and “technology” as an enabler of banking is tertiary.
I’d love to know what you think on this topic. So let’s keep the conversation going. Comment below.
“Many banks are not becoming technology companies.
They are becoming better at imitating them.”KEVIN MOSERI