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However, companies such as Nutmeg are
making significant progress in providing
customers with viable alternatives, not only
for current accounts but more lucrative
services such as wealth management and
investment advice.
FEATURE: BLOCKCHAIN & FINTECH
of traditional banks predict these big tech
firms will be their main competition within
the next three years, rather than FinTechs.
Banks really are having to fight for survival
on all fronts.
Make your bank resilient
If these factors are an indicator of the next
decade, industry mainstays must take steps
to redefine themselves as ‘resilient banks’. To
do this, they should embrace four key factors:
Re-invent with regulation
Elsewhere, digital-orientated outfits are
raising expectations for rapid customer
experience and transparency with a newer,
more agile breed of organisation that has
been poaching market share for some time.
What are incumbent banks
doing about it?
A recent report from Cognizant’s Center
for the Future of Work, The New Banking
Genome: Building the Resilient Bank of
Tomorrow, found that over half of digital-
first challenger banks, as well as three out
of every five FinTech firms, feel confident
that they can compete with the traditional
banking institutions. However, the same
report showed that only a third of incumbent
banks are conscious of the threats that these
new entrants pose.
The future is coming
Although some incumbents are perhaps
unaware of the risks, most understand that
their market share is being challenged.
Despite this, incumbents remain confident
that they can maintain a competitive edge
across their existing service areas.
Where they believe they fall short is in the
field of new technologies such as Blockchain.
And there is no smoke without fire; according
to the research, 34% of FinTechs are already
using Blockchain, compared to just 17%
of incumbents. Although the jury is out on
the impact of Blockchain in the short term,
completely neglecting its potential would be
short-sighted for any bank.
Clearly, there is significant attention
diverted towards these challengers with a
financial heritage thanks to their familiarity
with innovative technology. However, there
are also players outside the financial start-
up arena that are challenging the status
quo. Technology giants such as Amazon,
Google and Facebook have joined the
fray, as demonstrated by initiatives such
as Facebook Messenger Payments. In fact,
the report highlighted that over a quarter
www.intelligentcio.com
If a host of digital-first competitors was
not enough, regulatory changes such as
the Revised Payments Service Directive
(PSD2) and Open Banking Reform
are also contributing to the complex
industry backdrop.
Although start-ups are subject to this
regulation, incumbents are arguably
more concerned as the changes have
greater potential to expose their
technology, cultural and customer service
shortcomings. In particular, the arrival
of Open Banking has given third parties
access to customer account data held by
larger banks, prompting the evolution of
an ‘open banking marketplace’ in which all
participants can benefit equally.
Despite this, with data considered by many
to be the new oil, over three quarters of
banking executives surveyed agree that
incumbents’ access to a high volume of
customer data still gives them an advantage
over FinTechs and challengers. It will be
crucial to make use of their experience and
long-standing customer relationships to
maintain this advantage.
Banks must see new reforms as far more
than another tick-box exercise of regulatory
upheaval; rather, the start of a new
dynamic in the industry and a catalyst
to drive optimisation, innovation and
transformation initiatives.
• Put customers at the heart of
operating models: Reframe data and
processes around customers. Start by
simplifying legacy systems and applying
automation, then prioritise investment in
digital experience and data analytics
• Embrace the marketplace model: Open
banking is still in its infancy, but it has the
potential to scale innovation. Explore the
possibilities of white-labelling FinTech
services, partnering or even creating
FinTech incubators/accelerators
• Make culture the growth medium in
your petri dish: A culture of innovation
needs to come from the top and pivot a
central strategic aim. Communicate this
often and encourage employee feedback
on strategic initiatives
• Do not fall into Blockchain oblivion:
The ramifications of Blockchain at nearly
every stage of the banking value chain will
be profound. Identify these potential risks,
pilot and then build to remain resilient
Due to a range of factors, a new age has
dawned for the European banking industry,
with the barriers to entry drastically lower.
However, by redefining their operating and
business models with new technologies to
cater to the new environment, they will be
in a strong position to respond to geo-
political change and fight off challengers.
To protect market share, well-respected,
established institutions must prepare for
a battle on all fronts, or risk becoming
casualties this year. n
THE ARRIVAL OF OPEN BANKING
HAS GIVEN THIRD PARTIES ACCESS
TO CUSTOMER ACCOUNT DATA HELD
BY LARGER BANKS, PROMPTING
THE EVOLUTION OF AN OPEN,
BANKING MARKETPLACE.
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