A new video series, Decoding: Banks, has been launched by financial services consultancy, 11:FS, in association with digital banking experts, Jack Henry Digital.
The series features experts from the banking, FinTech and payments world, discussing the challenges that traditional banks are facing in 2022.
The first episode of the series focuses on how the banking battlefield has evolved over the years and what the future might hold. We’ve wrapped up the key insights from the video below.
How has the banking battlefield evolved?
The most significant changes to the banking sector have largely been concentrated in the ten-plus years since the 2008 financial crisis. As David M. Brear, Group CEO of 11:FS states, “we’ve seen the coming alive of the banking battlefield like never before”. He elaborates that whereas previously it would have been just big banks competing with smaller banks, we’re now seeing startups able to come into the market that are scaling faster than ever before.
In addition to this, there are big tech companies and non banks to consider. These new entrants have changed everything; banks are finding themselves in an increasingly competitive and crowded market. Sian Lewin, Co Founder and Head of Delivery at Regtech Associates, believes we’re currently in a very interesting space in the banking industry, with a number of competing forces at play, leading us towards what she describes as “a tipping point.”
In the middle of this ecosystem disruption, Lee Wetherington, Senior Director of Strategy at Jack Henry Digital, believes that almost any company can now offer something that was once only offered by chartered, licensed entities.
The significance of this is, as David M Brear points out, that when companies have to compete for customers’ attention “the products, the services, and everything else in the market keeps getting better and better.”
Understanding the history of banking, and looking to what the future holds
As Chris Skinner, financial markets and FinTech author and commentator, highlights, the origins of banking go back 10,000 years. The reason they’ve existed for all this time, according to Chris, is because the banks are “at the core of what holds together the economy, the government, and society.”
Chris goes on to explore the difficulties of obtaining a banking licence, explaining that banks typically have five times more regulation to navigate than a technology company. He believes “that full banking licence deposit taking ability is one of the biggest barriers for new companies to enter, because you need to have millions in capital before you get the licence.”
In light of this, many FinTechs are finding success in niche areas of the banking system without becoming a fully licensed, deposit-taking bank.
Chris believes that the FinTechs that have been most successful are those that take what banks do badly, and fix it. However, FinTechs that try and take them on directly are struggling, because banks are good at holding onto their turf.
Traditional banks still have the advantage of being seen as trusted entities, but they can’t ignore the challenges they increasingly face. The role of banks is changing. Customers are interacting with finances in a whole new way and the role of banking itself is changing.
The average consumer now has four to seven different financial service provider relationships. This fragmentation is new, and is what presents opportunities for all players, but also challenges… especially for banks.
Want to learn more? Explore our top picks from the rest of the series – which you can find here.
What are payments rails? | Decoding: Banks
How do payments work? What goes on behind the scenes every time we tap our cards? Find out more about how payment rails are at the very heart of the ability to transfer funds from one place to another.
Why is identity important in financial services? | Decoding: Banks
Identity has always been important, but understanding and proving who people are is more important than ever for KYC and fraud prevention
How does banking regulation work? | Decoding: Banks
Today the system is more interconnected than ever before. A crisis in confidence in one banking system in one area of the world can spread across the globe, which is why banking regulation is more important than it’s ever been.
How has software evolution influenced banking? | Decoding: Banks
The pace of technology development has exploded in recent years, and while banks used to be at the forefront of technological adoption, increasingly they are beginning to run behind.
What are FinTechs? | Decoding: Banks
Historically, speed of delivery wasn’t a core capability of banks. FinTechs changed this, and this video looks at what FinTechs are and how they have changed the space.
What is the biggest challenge for traditional banks? | Decoding: Banks
Banks are still spending millions of dollars to stand still. This video looks at how they need to move at FinTech speed.
How can traditional banks win on the banking battlefield? | Decoding: Banks
Keeping up with the pace of change is ultimately the biggest differentiator on the banking battlefield. Financial institutions need to remain relevant, and can start by rethinking their culture and org structure.
What might future banking ecosystems look like? | Decoding: Banks
Looking ahead, 50 or 100 years in the future, how many financial institutions will there be? Who will be the biggest players?