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Bank Innovation
In my previous post https://www.linkedin.com/pulse/fintech-era-9-mid-term-trends-bet-roberto-ferrari?trk=mp-author-card I noted down the 9 #FinTech future trends, taken from my recent book “L’era del FinTech”.
Here i focus a bit more on the first one that i called : Silicon Valley is coming (and actually they are not alone..).
#Banks have been shielded for centuries from competition. We couldn’t imagine until months ago a world without banks. Now things are changing, fast. Global digitization is creating a double effect: a) entry barriers to any market are brought down to new competition, and financial sector makes no difference; b) the new economy is creatingnew omnivorous global internet and #technology players, that are turning their heads (and their investments) also to banking and FinTech.
A very recent chart from the WEM (World Economic Forum) shows the latter with no need of additional explanation.
The world economy is increasingly becoming dominated by big global tech and internet giants across many sectors. Banking could be one of the next ones? So, what are the key moves the Apples and Googles are making?
Number 1 – Investments in FinTech startups : Did you know that Google Ventures is the third most active VC investor in North America Fintech companies since 2011, according to KPMG/CB Insights, and holds investments in key FinTech players such as Robinhood, OnDeck or Ripple and many more? Google is not the only one. Intel, Salesforce, Microsoft, Apple, Amazon they have all made investments and acquisition of FinTech startups.
Tech companies and internet giants have interest in FinTech as the last one has the potential to efficiently reach large masses on a global scale (see the payments story afterwards), take a significant slice of globally banking revenues and redesign significantly cheaper operations.
Number 2: Playing with payments. Apple, Facebook, Google, they are all playing with digital payments (proximity and/or remote) with several branded initiatives. Amazon was the first one to do so twenty years ago, in order to build its ecommerce platform and has months ago announced that will move forward, beyond its own platform. Why that? Because payments are one of the the biggest commodities in the world, are the entry point to billion of customers and their own spending and life style data, and both technology and regulation are making easier and easier for an over the top to build a digital proposition on top of global banking and payments rails (old and new). Tencent and Alibaba are also showing the way from China. It is very likely that in very few years we will see a totally different competitive scenario. Will banks be ready to react or they will end up like MNOs in the Telco industry?
Number 3: Increasing competition among omnivorous: Globally, competition among big tech companies will increase. There has been so much room for growth so far that there was not so much need to compete. But now, Chinese and Asian competitors are getting very strong, and at least in the Western World there’s is far less room for growth. Apple Pay is already competing with Android Pay for proximity payments and with PayPal and Amazon for remote payments, Facebook Messenger payments could become a strong competitor too. Stronger competition among big tech/web players will lead to greater investments and new competitive services, also in the financial sector if they decide to do so.
To conclude, it is not just from Silicon Valley, it is from the increasingly global and dominant internet and tech players that the threat is coming to banks and traditional financial institutions. This is serious and big as no one in the retail banking industry has the global scale to compete with them. How banks will behave and react? They have started to cooperate with Apple, for instance, but not everywhere. Is that correct or it is instead a forced, inevitable compromise that will ultimately de-touch customers from banks? And what will happen if digital giants will move to lending (as some is already doing?) or, even worse, if they will start to aggregate fintech platforms and startups to great a totally new competition on a global scale?. Piece by piece…….
[linkedinbadge URL=”https://www.linkedin.com/in/robertoferrari” connections=”off” mode=”icon” liname=”Roberto Ferrari”] is General Manager CheBanca!
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