Banks can’t ignore the disruptors any longer
Inside one of Canada’s oldest buildings, bankers are discussing the future.
Amid trade war turmoil, Brexit uncertainty and climate change concerns, there is one issue above all that dominates the agenda; digitalisation.
It is a topic at the heart of the 23rd World Conference of Banking Institutes held at the City’s Guildhall, where corporate bigwigs and academics are meeting to discuss “the age of disruption”.
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It was not so long ago that the cumulative impact of many of the so-called ‘disruptors’ in the City barely amounted to a rounding error on the big banks’ operations.
But today neo-banks, fintechs and payment providers are all giving the traditional high street lenders a run for their money, eating up a higher share of the market and piling pressure on their larger rivals.
You only have to look at the adverts dominating the tube network to clock the dramatic rise of new digital banking products.
A new report out this week from Accenture predicts that banks are set to miss out on as much as $280bn (£225bn) in payments revenue over the next six years if they do not adapt to shifts in the sector, with 18 per cent of UK banks’ payment revenue likely to be displaced.
“The digital boom will mean banks have to fundamentally change the way they think about their revenue composition,” said Alan McIntyre, who heads up Accenture’s banking practice.
Another new challenge from the digital boom was also raised in yesterday’s conference; data. Mountains of information are being used by the UK’s largest lenders to improve services and drive up customer retention.
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Banks have been investing in new infrastructure and recruiting more people with data analytics skills, but the question of trust over privacy rights remains one of the industry’s biggest hurdles.
“Standards will have to be developed for the ethical use of data and analytics,” said Lloyds banking group boss Antonio Horta-Osorio, who headlined yesterday’s event.
Horta-Osorio warned that privacy concerns sparked by the banks could create a “confidence backlash” among the public.
Be it the rise of data or the rise of fintechs, it is notable that two of the biggest challenges facing the whole banking sector are both technological: bankers now need to be tech wizards every bit as much as savvy money-lenders.