The market for banking services is getting more crowded
Banks face growing competition from technology companies such as Apple, Google and numerous start-ups, which are starting to offer payment and other financial services.
The “fintechs” are using digital and mobile technology to attract customers without the cost of running hundreds of high-street branches.
And they don’t have to worry about patching together ‘legacy’ back-office computer systems that are often 30-40 years old.
Thirty six per cent of European banks said they expect banks to be their biggest competitors by 2020, according to BearingPoint Institute's research* published in November 2015.
But could fintechs be banks’ digital savior rather than their nemesis? Just over half (54%) of European banks surveyed by BearingPoint say they want to co-operate with new entrants in banking.
Some banks are already partnering with fintechs to improve their technology and keep up with customer demands.
Deutsche Bank, for instance, plans to meet 500 fintechs each year and sign several agreements to co-operate with some of them via its ‘Deutsche Bank Labs’.
Another example is Crédit Agricole which, like other major banks, has launched a joint-venture. ‘The Village by CA’ is a start-up incubator, with office hub space in Paris (with expansion into French regions planned). It aims to co-create new products and services In theory, this arrangement can be a win-win for banks and fintechs.
Cooperating with fintechs gives banks access to innovative technology, saving them from having to invest in it themselves. In return, fintechs get access to capital and to a large customer base, which enables them to achieve economies of scale and turn a profit.
*BearingPoint Institute, ‘7 digital questions for banks’, survey, 2015