Co-Opetition in the Banking Industry

Shrinking profits, changing customer behavior, exponentially increasing use of mobile devices, digitalization and rising competition exert pressure on the banking industry. Some call the development a “Revolution”, emphasizing its speed and disruptiveness. Others name it an “Evolution”, accentuating its fundamentality. Overall, the rapid technology development simplifies the market entry for new players and fuels the competition between established and new market entrants. The new competitor species is not only aiming at snatching market share from banks, but is attacking banks’ business models fundamentally.

The so called FinTechs (a neologism created from the terms financial services and technology) have been seen to even attract the more traditional banking clients with services tailored to their expectations, while banks struggle to innovate accordingly. Most FinTechs position themselves by consequently taking advantage of technology development and by leveraging an in-depth understanding of clients’ needs, which banks seem to be falling short in covering. FinTechs are able to offer additional or competitive, easy and flexible alternatives or add-ons to banking solutions at a lower cost level, as flat hierarchies and permeable organizational structures usually enable them to quickly adapt to market changes and to benefit from shorter time-to-market cycles. Their customer focus, the transparency of offerings as well as the capability to innovate clearly distinguish them from banks today.

Although banks may have played down the power and disruptive potential of FinTechs at first, it has meanwhile become quite clear that the FinTechs have come to the party to stay.

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