Will banks always be part of the financial services supply chain?
Since the invention of money there has been an inbuilt advantage for banks and the established financial institutions.
But over recent years, especially since the internet revolution, there has been a move away from the establishment.
In one of his recent blogs posts, Transferwise Co-Founder and CEO, Taavet Hinrikus, explains that the banking crisis in 2008 had a significant impact on this too, and a number of the ‘big beasts’ lost the trust of consumers.
The impact of the smartphone and technology has greatly shifted the focus of the banking sector too.
With most of our actions now involving our smartphones, it was only a matter of time before technology influenced this industry too.
But what does the future hold for financial services?
1) Those entering the banking sector:
For those entering the banking system now, even if they’re just opening new accounts, they will find that millions of their peers are using non-banking technology.
2) The attitudes of consumers:
According to research from YouGov on behalf of Transferwise, even consumers believe their attitudes will change over the next five years.
Their research shows that in five years almost half of consumers believe they will use a technology provider for at least one financial service, and that in just ten years 20 per cent of consumers believe they will trust tech providers with all of their financial services.
3) How technology can improve banking and the established institutions:
In an interview in 2014, Somesh Khanna, the director of international consulting firm McKinsey, said that technology represents a significant opportunity for the banking sector.
Focusing on the customer journey, he said that the new financial technologies would enable each customer to have a much more personal relationship with their financial institution.
Khanna went on to remark that these new technologies also allow banks to automate processes that are currently being done manually.
With banks reducing their costs, primarily by becoming more efficient, it is likely that they will pass these savings on to their customers to entice them to continue working with them.
4) The ‘cool’ factor:
To survive in any industry, businesses need to have the brightest and best talents.
To put it bluntly, for lots of the next generation, fintech is cool and banking is old hat.
Lionel Barber, the editor of the FT, recently summed this up perfectly when he tweeted “nobody wants to be in banking, everyone wants to be in fintech” from Davos.
It is clear that financial management is now driven by technology, but the real question for the banks is how much they are willing to adapt. Just having an app to check your account balances won’t cut it if they are to survive in the new age of the financial sector.