The last decade has been tough for banks. Following the financial crisis, regulation was tightened, resulting in profit margins being squeezed. More recently, FinTech companies have entered the space to compete with banks, making profitability, client retention, and delivering a good experience to customers even more of a challenge.
Banks need to innovate, and they need to do it now, while still being able to focus on their core competencies and retaining their long-held competitive advantage. However, investing in solutions to catch up to their more agile FinTech counterparts is a difficult and expensive task to undertake when burdened with legacy infrastructure.
FinTechs have forced banks to not only think about infrastructure, but their entire business model. Large banks are least concerned about new entrants due to their reach, size, and established client base. But FinTechs are acquiring customers from small and mid-sized banks, who are unable to effectively service SME clients as the incumbent banks that support them scale back operations in other territories.
‘Re-drawing the map – The changing landscape of cross border banking and payments’, a Burnmark report published in conjunction with Banking Circle, revealed banks have identified that a ‘utility model’ approach could help them to optimise processes for end users without having to overhaul infrastructure.
Utility banking works very much in the same way as other utilities deliver a service; if you turn a tap, the expectation is that clean water will come out, but no thought goes into everything that happens in the background to make this possible. The end user does not care about the infrastructure behind it as long as it works. Quality of service and meeting customer expectations are key, whether a utility is delivering water, or financial services.
The banking industry is on the cusp of change. Watch Burnmark CEO, Devie Mohan, explain more about the disintermediation of banks, utility banking models and how the financial services landscape is evolving, or download the white paper here.