There’s certainly something relentless about the rise of the financial technology sector over the last couple of years: triple-digit growth to a forecast $19.7bn this year, weighty analyses, breathless media cheerleading. But is FinTech is going to kill the banks – or save them?
The current dotcom-like fintech growth spurt – $2.97bn invested in 2013 is expected to reach $8bn by 2018, according to Accenture – may be unsustainable but there’s little doubt that it’s going to be disruptive. Compared to other sectors – the Amazonised high street and Spotified music business to out-Ubered taxis – finance (and banking in particular) have so far seen relatively little big-scale technology-driven change.
Yet the opportunities for new business models to deliver better customer experiences, value and margins are immense. The industry – and, often more vocally, its customer base – is ready for some kind of revolution.
Thanks to the global importance of the British financial services sector, a digitally-confident home market and London’s emergence as a centre for many pioneering technologies, some of the leading disruptors are to be found in the UK – including more than half the Fintech50. Some already appear to have the potential to threaten Carney’s Uber-moment for at least some established banking services, especially in peer-to-peer finance.
Truly data-driven business models are perhaps the single biggest difference between the traditional banks, still mostly making money through transactions, and the majority of fintech innovators. In the digital economy, adding value to information is how firms like Uber, Spotify and Amazon are becoming (or already are) global near-monopolies. The idea of a ‘Facebank’ is not so far-fetched and the potential for Carney’s “imminent” Uber-moment global revolution is undeniable. Could that mean the end of banks as we know them?
Actually, as we’ve seen from the Fintech 50 and Accenture’s Innovation Lab, most current development is about saving the banks, not killing them. Accenture, Barclays, Santander and many other established players are sensibly looking to benefit from this boom by investing in it and using the results to improve and adapt their own business models and the services they can offer their customers.
The complexity of global regulation in which fintech innovators will become more tangled as they grow will, ironically, maintain the status quo for longer than in less-regulated sectors – including technology itself. So the current speed of change in fintech may well be unsustainable and could lead to unpredictable booms and busts.
But the level of innovation we are seeing in financial technology – from global giants to Tech City start-ups – means banks and their customers can look forward to better designed products, greatly improved service and more profitable businesses in the very near future. At least until that Uber moment arrives.