Fintech forcing major shifts in banking strategies

The banking sector is undergoing many changes currently, as technology is becoming increasingly important to keep up with fintech competition. It has become apparent that the space is evolving in a way that will see new technologies have an outsized impact in the next few years, according to a report from Temenos and The Economist Intelligence Unit. Additionally, the report examined the impact of open banking and how banks are shifting their business models, among other things.

Here are some of the key takeaways from the report:

• Tech and digitization will have a bigger impact than regulation. Forty-eight percent of banking executives think new technologies, such as blockchain and AI, will have the biggest impact on retail banks through 2020, while only 43% are most worried about regulatory fines. This is the first time in five years that respondents have put digitization above regulation in terms of impact, marking an important turning point in the industry.
• Few respondents think open banking will be most impactful for banks. Though open banking initiatives are the center of many recent stories, only 13% of respondents think those initiatives will have the biggest impact on retail banks. This is likely because open banking is still at the very beginning of its development, and we will likely see more of an impact after 2020, once the initiatives become established.
• Most banks want to develop niche propositions for their customers. In terms of evolving their business models, 61% of banks want to develop niche propositions for their own customers, followed by 54% wanting to maintain their own products and become an aggregator of third party-products, and 53% opting to open their services to third-party developers. The trend of focusing on niche products likely comes in direct response to fintechs emerging that often tailor their products to a certain demographic.

Financial regulatory frameworks appear to be adapting to new technologies globally. That new innovations are set to have such a major impact on retail banking in the next few years suggests that regulators have come to a point where they can allow these technologies to flourish.

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Source: Fintech forcing major shifts in banking strategies – Business Insider