Over the last few years, there has been a huge shift in the banking industry. High street banks are closing branches, while challengers and online-only banks have been slowly capturing market share thanks to the easing of regulation across Europe and the increase in mobile adoption.
Non-banks and challengers have been moving into the payments space since the Payment Services Directive (PSD) enabled them to provide financial services, increasing competition and providing a level playing field. Those that have been most successful in the space so far have focused on delivering digitised solutions to the end user – an area where incumbents have previously been slow to innovate.
Some traditional banks are beginning to shift towards the approach of the FinTech, becoming more adaptable and agile, and fighting hard to retain customers by investing heavily in improving the user experience, flexibility, and accessibility of their products. However, banks are still being held back in an area that has been untouched for decades; back office infrastructure.
Banks no longer want to be the pipes – they want to be the plumber
Banks have to deliver a wide range of core and non-core solutions, the vast majority of which are underpinned by complex legacy technology that is expensive to overhaul. While tier one banks can afford to invest in rebuilding technology and developing new solutions in-house, smaller banks, where competition is far greater, simply can’t. To survive, they need to move up the value chain, digitising for the end user, without having to worry about back office solutions letting them down.
This is where the financial utility comes in.
By partnering with FinTechs who specialise in building APIs developed to cater for a specific niche or vertical, a bank can ‘plug and play’ these solutions into existing infrastructure at a minimal cost, making it easier to optimise or expand its product offering. Because the utility is not a competitor, and is scalable, it can provide services to any financial institution, large or small.
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