Big Banks and the Fintech Revolution

Big Banks and the Fintech Revolution

If you can’t beat ‘em, join ‘em.

If this references monolithic banks and financial technology companies (fintech), banks will use the sheer weight of their power and marketing position to get the fintechs to join them. Fintechs were once widely lauded as being the Che Guerva of the financial world, threatening the globally dominant banks with the power of a pistol-wielding guerilla. While the threat of a “revolution” is not beyond the realms of possibility, which it never truly is, the upheaval of banking at the hands of a tech upstart is becoming increasingly remote.

According to the statistics-compiling company Atlas, there were only 88 fintech start-ups in 2017 versus 1,000 in 2015. This isn’t to be interpreted as due to a steep decline in developing financial-tech hybrid business models, but rather can be largely attributed to banks directly assimilating these projects. The reason for this makes both dollars and sense: the big banks want immediate access to the developing technologies while the otherwise independent startups want the generous injections of cash to fund their projects. A revolution is still going on, but it is happening within the confines of the system as opposed to disrupting these systems from the outside.

While it could be argued that working from within the system may slow down the rate at which a startup develops, the end-result of a tectonic shift in paradigms won’t be put off indefinitely. After all, major banks are renowned for their eagerness to embrace both innovation and forward-thinking policies, and therefore a marriage to an entrepreneurial tech company is sometimes a good match.  

UBS CEO Sergio Ermotti has a unique take on this situation, going as far as to say that “the battleground is not in the front office. The battleground is the back end.”  In other words, the biggest improvement in service that can be offered comes from improving the package of data-mining along with robo-driven analytics. In line with this theory, the maximum efficiency of front-office service has long ago been reached, and in the drive to offer better value-added service, the back office is expected to provide a strong tailwind.  

For more information, please read:
Big Banks Will Win the Fintech Revolution | Wealth Management


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