This exclusive thought leadership roundtable event brought together senior executives from all corners of the Financial Services industry, such as payments, technology, challenger banks, retail banks, and more.
Designed to be disruptive and informative, guests shared insights and experiences, and how they see the future of the banking industry; held in the heart of the City at the top of the Gherkin.
From blockchain to mobile banking, digitisation is shaking up the FS industry. But do we believe banking will be changed forever, or are we falling for another tech hype? We brought together C-suite executives, commercial heads, and partners to debate this topical and often controversial question.
While no conclusions can be reached in a mere two hours, here are a few of the key talking points from senior execs across the industry:
Will emerging technology be a threat or an opportunity in retail banking?
Mobile will increasingly allow challengers to pose a threat to legacy banking models and companies. While traditional banks may be able to survive and prosper through digital transformation, such success will require an overhaul of their in-house technology estate, as well as their product range. Big banks’ ability to survive wave after wave of change, from the dot-com boom to the rise of the fintech start-up, may well indicate their stamina to weather another.
New banks may emerge and take more significant market share, being able to learn from their more traditional peers but without needing to maintain the same costly physical infrastructure. These new banks may come from the financial services industry, or from outside it – mobile hardware and software companies have already tested the waters through initiatives such as Apple Pay. These challengers could form acquisition targets for more established players in future.
Do you need to be a bank to be a bank?
There remains dissatisfaction and distrust around banking, yet customers’ expectations of their banks are still growing: UK banking customers are digitally savvy and demand the same level of digital customer services from their banks as they receive from online retailers. The challenge for banks in the future will be how to create consistent and memorable customer experiences. However, customers may prefer that excellence be defined. For those that fail to deliver, customers may turn to non-traditional quarters and industries – a social media company, for example – for their banking services. This could well play out as an aged-based trend: a 16-year-old might be content to trust their social network for their first debit card, but a couple with young children buying their first house may prefer a more traditional brand name.
Do open ecosystems have to happen?
Open APIs and open ecosystems can help the financial services respond to changes in customers’ banking habits, allowing them to focus on their core infrastructure while using open APIs to leverage a much wider ecosystem. Combining basic banking services with open APIs, supplemented by low-cost providers of peripheral financial services from the fintech world, could be one modular model that could play to both big and challenger banks’ strengths. Such a change would reflect how consumers are already shopping around – rather than getting all their services from a single provider as they once did, they’re turning to comparison sites as their gateway to find products. Potentially, open APIs could allow a single entity to sit at the heart of an individual’s banking experience once again, yet offer a far wider range of products by integrating startups’ own offerings. To make the best of the opportunity, however, incumbent banks will need to work out the right balance between being a platform for best-of-breed services, yet avoid ending up a ‘dumb pipe’ that only acts as a conduit for the products of others.
Could financial inclusion mean financial disruption?
For some, banking is much the same as a utility, something they rely on but only want a minimal relationship with. However, some argued that those on lower incomes, whether in developed or developing countries, seek greater value from their banking services than others on higher wages. That demand may have ripple effects on their wider market as time goes on, as those banking models propagate and increasing numbers of unbanked individuals take their first financial services products. Similarly, challenger and disintermediated banks are likely to lead to growing numbers of branch closures – meaning that a fresh sector of the banking public may find themselves on the wrong side of financial inclusion.
What is the big strategic question for banks in 10 years’ time?
The group discussed openly the possible state of banking in 10 years’ time, agreeing on 5 possible scenarios; The large incumbent banks simply ‘improve’ with the challenger bank surge ‘fizzling out’, green field ‘customer-focused’ challenger banks growing to a size where they can effectively challenge, the rise of the disintermediated banks (Facebook bank, Apple Pay, etc..), rise of the modular bank, large incumbent banks becoming more modular.
For more information on our upcoming events, or FS service offerings, please get in touch with Chris Chandler: Chris.Chandler@lafosse.com