Banks, especially those built on the traditional “face-to-face” service model could be facing a “Kodak moment,” no matter what the benefits of the “human touch” are.
Photography pioneer Eastman Kodak sold the first consumer cameras in the 19th century. But it struggled to face the unstoppable wave of digitisation that sent films into oblivion and filed for bankruptcy in 2012.
Many anachronistic banks could face such “Kodak moment” or “Uber moment” leading them to obsolescence in five to 15 years as the industry is being transformed by technology such as smartphones, contactless cards and blockchain, according to former Barclays CEO Antony Jenkins.
Here are some expert predictions on how fintech will bring about an upheaval in the banking industry.
Former US Treasury Secretary Larry Summers sees a 30% chance that 10 years from now, there would be a fintech company with the kind of $250bn market cap that some big American banks have now.
New technologies are poised to sweep through investment banks, relieving many employees of roughly a third of their current workload, according to McKinsey & Co. Cognitive technologies – applications or machines that perform tasks once requiring human thought – are now cheap enough that banks can deploy them across operations to facilitate trades or other capital-markets business, it said.
Is the industry rising up to the challenge? Britain’s biggest lenders are closing branches and increasing their investment in technology. But those laggards without the right “culture or mindset” may struggle to transform themselves despite their tech spending largesse.
As automation has been sending shivers down spines across the Wall Street, some bank staff worry they will be replaced by machines. But McKinsey has a relatively benign message: companies already making the transition aren’t slashing workforces, but helping “free up valuable subject experts to do more.”
Jamie Dimon, chairman and chief executive officer of the largest US bank, JPMorgan Chase & Co says technology creates opportunities while keeping costs at bay.
There is a flip side, though.
Gary Cohn, who last year stepped down as president of Goldman Sachs Group, told investors in 2011 that technology had helped the bank to shrink its equities staff by more than half over the previous decade.
Not so long ago, across the world, homebuyers, entrepreneurs and college students went hat-in-hand to the bank to apply for a mortgage, small-business credit line or student loan. But that no longer is the case. For old-fashioned banks and money managers, fintech is causing a dramatic upheaval, possibly the most since mainframe computers first whirred to life on the Wall Street in the 1960s.
For all its appeal, fintech requires the support of the establishment and the watchfulness of regulators if it’s to truly reshape finance for the better.
Summers says that fintech is likely to make a substantial contribution by removing frictions. But regulators should ensure that when fintech companies succeed, it is on the basis of genuine efficiencies, not because of regulatory avoidance or zeal.
For banking laggards, fintech is at the gate.
Related Story