Banks should watch out – the fintech era has barely begun

There’s an endless stream of news about open banking and challenger banks, while the traditional finance sector watches on with a mixture of admiration and suspicion.

Banks have come under attack, not only from the hype-machine, but more meaningfully from startups. Traditional finance providers that assumed they could weather the technology storm on reputation alone are quickly being proved wrong.

None of the old guard is safe, because the fintech revolution is not a revolution at all. It never has been.

“Fintech” is not a moment of traumatic change that will pass; it is an evolution that will sweep away the companies that do not evolve. And if you think we are nearing the end of this wave of change, think again.

Before we look to the next generation, we should consider how we got here.

Historically, a bank has been a place where consumers deposited their cash, and a trusted partner in buying a car or a home. Banks also provided other useful services: current accounts, savings accounts, investments, trading, credit cards, loans, and mortgages.

And while banks were promoting a wide range of products, other providers sprung up to offer extra services. Do you want a new card with a zero introductory rate? Fill in a form. Want a better mortgage deal? There’s a mortgage broker, or an online comparison website for that.

Fintech has not fundamentally altered these dynamics. Instead, it has democratised the processes behind them, and made everything easier for the consumer. It’s the kind of change we have seen throughout history as markets evolve, only playing out faster and more dramatically than the old guard was ready for.

There are the three factors that usually bring about mass change in consumer behaviour: price disruption, state-of-the-art products, and network effects. And they are all at play in fintech.

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Source: Banks should watch out – the fintech era has barely begun | City A.M.