Digital Disruption How FinTech is forcing banking to a tipping point
- CITI-GPS
- 11 avr. 2016
- 2 min de lecture
When I was growing up there was a weekly ritual in our house. My Dad would bring home a check on a Thursday night and leave it under the clock on the mantelpiece. Then by hook or by crook, my Mom would make it to the local bank branch on Friday, deposit the check, get cash, and return a few dollars back under the clock for Dad for the coming week. To my Dad, the clock was the first automated teller machine.
With advances in technology, the relationship that customers have with their bank and with their finances has changed. Customers rely less and less on walking into a branch for their banking needs, and instead have digital options to help them — ATMs, on-line chat, mobile phones, and Internet banking. So far these have been seen more as additive to a customer's banking experience but when do we go over the digital disruption tipping point and see a change in the fundamental banking business?
Investments in financial technology have growth exponentially in the past decade — rising from $1.8 billion in 2010 to $19 billion in 2015 — with over 70% of this investment focusing on the "last mile" of user experience in the consumer space. The majority of this investment has also been concentrated in the payments area and this is where banks are seeing the most competition with new entrants. Competitors already established in new marketplaces, such as PayPal for e- commerce payments in the US, or emerging in client segments traditionally underserved by banks (such as micro and small businesses) are starting to gain traction and ramp up their scale.
Despite all of the investment and continuous speculation about banks facing extinction, only about 1% of North American consumer banking revenue has migrated to new digital models. Although FinTech companies have the advantage of new innovation, incumbent financial institutions still have the upper hand in terms of scale and we have not yet reached the tipping point of digital disruption in either the US or Europe. Given the growth in FinTech investment, this isn't likely to continue for long.
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