Fintech is a word that was introduced in our vocabularies in the last few years and considering that it is a sector that has been consistently growing, it’s not going away. According to data from the Investment Trends in Fintech report by the Silicon Valley Bank, in 2015 Fintech was worth £20bn in revenue to the UK economy.
Fintech is driving change
What does this mean? It means that small companies introducing new and effective technologies for performing financial transactions are changing the financial sector’s landscape. Many of these technologies are disruptive (such as bitcoin – and the technology that supports it, Blockchain) and seriously threaten the future of traditional banking.
Banks, due to their size and the fact that they operate in a highly regulated industry, typically find that transforming and innovating are difficult objectives to meet. Some also mention a systemic resistance to change, as can be seen in this candid article by Chris Skinner on his blog The Finanser.
However, this technology-driven landscape means that for these institutions to remain competitive, they have to become more agile.
Moreover, in a world where consumers expect to interact with companies in real-time, banks need to not only be focused on quickly resolving the issues of today, but also need to think of the best way to serve the customer of the future or risk losing business.
Banks don’t exclusively own the financial sector anymore: consumers now have other sources for raising funds (crowdfunding platforms such as Kickstarter or IndieGoGo), to buy or sell currency (WeSwap allows users to swap currency with other people abroad) or to get a loan (TruePillars is a marketplace for SME business loans). Atom Bank is currently launching to disrupt current accounts and retail banking – with the firm advantage of building culture and technology from the ground up.
The future doesn’t have to be bleak
This might all sound as though I’m painting a dark picture of the future for traditional banking. After all, there is good reason to be worried as things are changing at a fast pace and the market will never be the same as before. But, just because things are changing, it doesn’t mean that all is lost. Banks are now realising that they need to change and innovate. It’s very much time for the sector to punch through the perceived barrier to innovation.
How can the banking sector innovate?
- Introduce new products to market – breaking into new markets and finding sources of revenue
- Improve speed of delivery for services, especially the most basic ones – in these days of immediacy, customers find it hard to accept that opening a basic current account can still be a lengthy and bureaucratic process
- Focus on the customer journey – and put customer needs in the spotlight
- Adapt/change legacy systems – outdated technology can be a huge barrier to innovation
- Collaborate – with Fintech, with start-ups and increasingly with each other
- Attract and retain the best talent – and give them as much freedom as possible within a strict regulatory framework
Some of the above suggestions revolve around changing the culture and the way people work traditionally in these institutions. Adopting a new way of working, with innovation at its heart is imperative, if banks really want to take innovation from the whiteboard to reality.
By changing the way these institutions traditionally work and embracing EveryDay Innovation banks can start seeing results and will be able to compete with other smaller, nimbler companies, securing their future.