Do advances in the fintech sector endanger traditional commercial banking?
March 15, 2017
The business and personal finance media has for some time been awash with talk of fintech disruptors muscling in on the financial services market. A particular focus has been their apparent ability to take advantage of the malaise endemic across the banking market since the global financial crisis and the sector’s antediluvian technology.
It now seems that the threat to traditional banking has become official, after Bank of England governor Mark Carney warned in late January that, in time, fintech could “signal the end of universal banking as we know it”.
In fact, the potential impact of fintech was confirmed as long ago as January 2015 when the Royal Bank of Scotland announced its intention to partner with a number of leading crowdfunding platforms, such as Funding Circle, referring on loan applicants that it had rejected.
Traditional financial institutions have also been buying up fintech operations, either to learn from them or to use their innovative skills to generate alternatives to their existing software and operating systems. Banks are also looking to reinforce their economies of scale and broaden the scope of their business models.
The real magic of fintech is its ability to ‘unbundle’ banking, separating it out from existing providers into its core competencies: settling payments, handling maturity transformation, sharing risk and allocating capital. These functions can now all be handled by fintech entrants – payment service providers, aggregators and robo-advisers, peer-to-peer lenders and a whole range of tech-enabled trading platforms.
This revolution has been driven, of course, by the ubiquity of the internet, the availability of ultra-high-speed computing, the emergence of mobile communications, advances in cryptography and, most important in terms of human impact, machine learning leading to potential artificial intelligence (AI) solutions…..
To read the full article by our Business Risk Adviser, Nick Hood, click on the link below