Finance Monthly April 2020 Edition

Today, generations have grown used to, or have never known a life without digital devices. These devices, and the emergence of the apps that utilise their unique user experiences, have changed and raised the expectations of customers across multiple sectors. Banking disruptors since the early 2010s have set a new paradigm with ‘the age of air’, aided by the emergence of open banking, which has flooded the industry with those looking to host customers that want to easily engage with their finances. Within this new model, how much do the established banks fear the disruption? Are the disruptors streaking ahead? According to PwC, 88% of banks are still concerned they’ll lose revenue to innovators. However, the disruptors’ march to exponential growth has not been as great as financial forecasters and experts first feared. For established banks, the initially unnerving emergence of new disruptors is now appearing to shift towards a respectful viewpoint that holds opportunities for both types of organisations. In today’s era of technological disruption, the speed and transparency of change for the customer is becoming ever-more apparent. Yet, technological disruption in banking is not something unique to the 21st century. In 1950, money was transformed froma physical entity into an idea when The Diners’ Club Inc. introduced the first universal credit card. Further technological disruption followed in 1967 when Barclays introduced the first ATM. Since then we have experienced electronic stock trading with the introduction of the NASDAQ (1971) and e-commercebusinessmodelsdrove theburgeoning internet in the 1990s. Whilst digital banking disruption continues to grow, a recent study by the Competition and Markets Authority (CMA) found that Barclays, Lloyds Banking Group, HSBC and The Royal Bank of Scotland Group have all retained a 70% share of current accounts. Why is this? Are the banks beginning to hold their ground? What have they learnt from the disruptors? LOYALTY While the disruptors have certainly unnerved the banks, they’ve also woken them up to new possibilities and to the acceptance of their frailties. Their inertia and internal constraints that cause a lack of true innovative thinking in the most recent digitally transformative years was a weakness. For all the revelations of their Achilles’ heel, they also discovered what advantages they have over disruptors too. Despite the new, branch free, digital challengers offering innovative solutions and picking up new customers, gaining prominence and prestige, the established banks still have something on their side. Loyalty. FINANC IAL INNOVATION & FINTECH - DISRUPTORS 21 www.finance-monthly.com