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Is Big Technology the Next Challenge in Banking?

Tech firms to challenge banking status quo

Some of the largest, most innovative companies on the planet have their sights set on a new frontier: Banking. As consumers drive demand for more elegant, tailored financial solutions, Big Technology is stepping in to fill the gap.

While many banks have been on a years-long mission to drive digital transformation, overcoming legacy systems, IT department backlogs, processes, and regulation are stonewalling the progress. These challenges may have them sitting dead in the water in the new Open Banking climate.  

Regulation a key challenge in banking

According to a recent Financial Times post, companies like Amazon, Tencent, Facebook, Alibaba, et al., are poised to “cherry pick the best parts of [the banks’] business.” The worst part, according to many bankers? They’re not playing by the same rules.

These companies have the coffers, the data, and the freedom to get an entire 360 degree view of the public right down to transactional data. It poses a risk to the financial system, and public interest alike. Bankers are calling for regulators to level the playing field.

The notion is articulated perfectly in the article by Ralph Hamers, chief executive of Dutch bank ING. I’ll share verbatim the excerpt from FT:

New European “open banking” regulation had opened the door to Big Tech entering the market. “That is a threat to banks — because they have much more money to burn,” he told the FT. “If they get this data they will go full circle as they don’t currently have transactional data on what people buy,” 

Banks must gain agility to compete

With the future outlook uncertain and the landscape evolving rapidly, I’m not here to advocate either way. While large corporations gaining an intimate “total view” of the customer carries totalitarian implications for the industry, I believe that may be a bit alarmist.

For me, one thing that stands out is with new competition on the horizon banks will need to gain unprecedented agility in order to maintain or grow market share.

One of the biggest kept secrets in banking is all of the behind the scenes processing that must happen in order to complete the banking industry is at a severe disadvantage when it comes to competing with big techeven the most simple transaction. Consumers don’t realize that when they tap their card to make a purchase, or use an app to pay a bill they initiate a complex chain of tedious, often manual processes in middle and back offices within their bank.

To borrow an analogy directly from one of the industries most noted pundits, Don Tapscott, banking infrastructure has become eerily similar to a Rube Goldberg machine. That is to say, it is overly complicated to complete even the simplest of task. **Shameless plug** I had the chance to meet with Don at the annual Canadian FinTech Awards where we took home some hardware. We both agree that if we accept that notion, the industry is at a severe disadvantage when it comes to competing with tech giants. All the whirring and whizbang described above translates to severe expenditures, inefficiency and revenue leakage for banks.

clock is ticking for banks... partnering with FinTechs is key to accelerate digital transformation

The path forward is actually simple

We’re not talking small companies. These are the blue chip businesses behind the most intelligent, sticky user interfaces on the planet. Consider — would you want to bank with Apple? They’ve arguably mastered user experience and digital technology. They’re presumably light-years ahead on truly digital end-to-end experiences. Could they or other tech giants give banks a run for their proverbial money? Perhaps.

This much is clear, the clock is ticking for many banks. My running theory, and one validated in our recent interview with a banking exec at a Tier 1 bank: partnering with FinTech companies to accelerate digital transformation is key in overcoming this challenge in banking.


About Zafin

Zafin (@zafin) is a leading financial technology provider that enables banks to form richer, more personalized client relationships. Built from the ground up for financial services, its platform empowers banks to enhance revenue and operational efficiency. Founded in 2002, Zafin sits among North America’s top FinTech companies, and is trusted by retail and corporate units at some of the largest banks worldwide. Headquartered in Toronto with global offices, Zafin has a proven track record with a 100 percent client retention rate as validation.

Don Halliwell

Don is the Senior Director, Growth Marketing & Communications at Zafin. As former editor in chief and contributor to numerous publications, Don is passionate about sharing stories. At Zafin he will drive a clear and compelling narrative focused on digital banking and innovation in FinTech. Follow him on Twitter @donnyhalliwell

The post Is Big Technology the Next Challenge in Banking? appeared first on Zafin.



This post first appeared on Blog | Zafin | Banking Software, please read the originial post: here

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Is Big Technology the Next Challenge in Banking?

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