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Retail banking could witness “fintegration”: EIU
Over the next five years, retail banking is likely to see a growing trend of banks’ co-option of Fintech models, notes EIU.
The Economist Intelligence Unit published a report titled: “The disruption of banking” after surveying over 100 senior bankers and 100 Fintech executives to ascertain the likely landscape for the retail banking industryover the next five years.
Fintech will strongly impact retail banking landscape
The EIU report points out that digital disruption is the top-of-mind technological issue in the C-suite today, with senior executives in virtually every industry wondering whether their firm will be Amazoned or Ubered. The report notes the multi-trillion-dollar banking industry is facing disruptive challenges by financial technology upstarts, known as “Fintech”. The EIU report reckons over $25 billion has been poured into Fintech in the past five years, making it the number-one target for venture funding.
Highlighting the enormity of the challenge, the EIU report draws attention to JPMorgan CEO Jamie Dimon’s remarks to his shareholders about Fintech: “They all want to eat our lunch. Every single one of them is going to try”.
The EIU report points out that though over 90% of households in developed economies use a bank, over 90% of bankers project that Fintech will have a significant impact on the future landscape of banking. However, a majority of bankers (54%) believe that banks are either ignoring the challenge or that they “talk about disruption, but are not making changes”.
Touching upon the strength of banks, the report notes one of the hallmarks of the customer relationship is a reputation for trustworthiness and stability with no major retail bank failed in the 2008 financial crisis. Nearly 95% of bankers and Fintech executives believe that banks will remain in a strong position even as Fintech gains ground:
Banks will continue to dominate
The EIU survey reveals that Fintech executives respect the banks more than the bankers themselves do. Responding to the future balance between the two segments, Fintech executives were more than twice as likely to predict that banks would continue to dominate the market:
The EIU report points out that Fintech firms have the ability to take a “category killer” approach to banking portfolios, as the Fintech firms are able to maintain a laser-like focus on a single product, building excellence into both the technology and customer experience: