Armin Eiber

Armin Eiber

Established banks have strength in terms of economies of scale and size both in customers and data. However they really struggle to adapt to change

In the mid 90’s Bill Gates famously said that banking is necessary, banks are not. Will this be the end of banking as we know it? Established banks have strength in terms of economies of scale and size both in customers and data. However they really struggle to adapt to change especially in view of technical disruptions often initiated by a FinTech. Will they be able to survive?

In BJSS’ view banks have a future if they radically review their operating models and collaborate with FinTechs rather than seeing them as competition. We believe there are only two ways banks can go.

  • A customer facing data driven marketing powerhouse that offers highly personalised services, has the most sophisticated digital marketing and maximises conversion rates through integrated and convenient front end processes. Convenience is key and ideally banking services are integrated in the actual consumer process such as payments when during the buying process. Customer data is generated both internally and via the wider ecosystem leveraging open banking. This enables banks to target relevant customers effectively and predict their behaviour as well as likely demand in the future. Ultimately, these banks help their customers manage their finances and budgets across all their transactions.

The alternative model is

  • A banking technology platform provider offering full banking solutions or components that are entirely digital and automated. Banks will collaborate with a large ecosystem of different FinTechs that offer specialised components such as Cyber Security, Customer Analytics etc. All of these will be fully compliant with regulations and constantly updated to reflect changes in technology as well as rules. Banking technology products and services could be global for some clients but also very tailored to specific markets that may have different linguistic challenges as well as different rules and regulations.

Fintech’s will play a large part in both models by bringing innovative and disruptive technologies into the banks without having to cater for the legacy infrastructures. However, the real strength lies within the cooperation between banks and FinTechs as both have compatible strengths and weaknesses ie. scale and capital vs nimbleness and innovation. Together they will be able to optimise the value they create for themselves as well as that for their customers.

BJSS believes that traditional banks have a future but they need to decide which end of the two models they intend to play. In both cases it is essential that they are widening their ecosystems and change their culture from being highly competitive to embracing a more collaborative approach and become more nimble and adaptable.