The Rise of Fintech and Banking Disruption

Could Outmoded IT Evaporate Big Retail Banks?

Old retro steam train

As we’ve seen in CRM, ERP and other mission-critical technologies going to the ‘cloud’ over the last decade, a new pace of innovation is now possible. Such changes in technology allow more innovative delivery models, better services and lower costs.

This enables new entrants into the previously localized banking oligopolies to now compete with the big boys in their markets. Whether it’s microfinance organizations through more personal delivery channels or streamlined online lending through non-banking financial institutions, technology is a key factor in allowing new players to come into the market with new and better products and services. They might be addressing ‘unattractive’ market segments for now, but all disruption begins that way.

Big retail banks with their expensive and inflexible legacy systems could simply evaporate. Yet most banks are firmly in denial.

One could argue that banks have been slow to adapt but frankly they haven’t needed to. A lack of competition and a lack of consumer demand hasn’t forced change. Sure, there have always been complaints and the whole process always seemed dated, but who else are people going to trust with their money? What choice do they have?

The banks could find all their customers are moving…banks are complacent, like a fish doesn’t know it is in water.

As the choices begin to open up, as the financial crisis erodes trust and as consumers’ standards rapidly increase banks will rapidly find themselves in a new and uncomfortable competitive environment. It will be difficult to adjust in this game if you’re still steering a train while everyone has a Porsche.