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Bank innovation has tended to focus on retail customers, but expect more technology for commercial customers in the coming year as those clients deman products that are easy to use and help them run more efficient enterprises.
December 21 -
KeyCorp is partnering with fintech firms to offer innovative payments products to its commercial clients, as interest in payments technology begins to spill over from retail into commercial.
December 4 -
By allowing commercial clients to authenticate via an eye scan, Wells Fargo is making a burdensome task simple. Secil Watson, head of wholesale Internet solutions, is pushing the bank to make digital banking easier for commercial clients.
May 31 -
As U.S. banks wrangle with account-aggregation sites over screen scraping, the U.K. is championing a safer method for sharing data that could transform the way customers interact with financial institutions.
November 25
In the ongoing battle of big banks versus fintech companies, there will be an ultimate victor: the incumbent. By 2025, leading banks will operate as digital financial superstores that blur the line between technology companies and banks.
The banking transformation process, years in the making, is only accelerating due to the recent rapid change in customer expectations. One-click ordering from Amazon, tracking fulfillment requests from Uber and other innovations are altering business customers' perceptions about what is possible and what is expected in e-commerce. These tech companies are setting new standards. Bank customers likewise expect their banking interactions to be easy, fast, transparent and on their own terms.
Up until now, the nonbanks have been leading the way to redefine the digital banking experience at a time when incumbent banks have been buried in regulation and cost cutting that has made onboarding, loan applications and other standard functions more difficult, time-consuming and frustrating. Such troubles have created an opening for nonbank lenders and fintech providers to leverage cutting-edge technology and their own largely unregulated status to deliver the type of service and experience consumers have come to expect from the best Internet and mobile sites. That said, it is tough for new providers to reach scale, so partnerships with, capital infusions from and acquisitions by banks are accelerating at a rapid pace.
And ultimately, these very same pressures are pushing banks inexorably toward a new model where banks will feel and operate more like tech companies with banking licenses. About 65% of banks' technology spending — funds previously focused on new products and enhancements — was deflected over the last 24-36 months to address regulatory gaps in compliance, risk, security and fraud. Looking ahead, with much of that investment made, banks can pivot back more towards customers' digital needs. Already, they are moving faster on all fronts — including the frequency of their app updates — and making investments in technology.
This pace will only get faster. The new marketplace model will take shape by 2025, when the industry arrives in what we have called "
Nonbanks, meanwhile, will be stripped of their technology and regulatory advantages, assuming regulators act appropriately; thus, they will lose some of their competitive advantages, including cost and price. With profitability eroding, many fintech companies will eventually be purchased by banks, further enhancing banks' technology prowess.
Regional banks, however, will struggle to keep up with mounting costs of IT investments, leveraging white-labeled technology from third-party providers where they can. Small and community banks will attempt to leverage white-labeled technology to maintain their own value propositions and be forced to compete for segments truly valuing personal touch and local decision-making.
Even as large banks reassert themselves in a digital age, they will face competition from new market entrants eager to apply far-flung communications networks, artificial intelligence, cloud-computing platforms and other technology advantages to the world of banking. Virtually, the only thing standing between banks and giants like Google and the telecom providers will be a banking license.
Don Raftery is managing director at Greenwich Associates. Raftery leads the firm's commercial and corporate banking practice globally and can be reached @GreenwichAssoc.