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2016 REVIEW The year of living cautiously
As 2016 draws to a close, Scott Thompson and Alex Hamilton pull together the key banking technology/FinTech trends that have emerged over the past 12 months
Digital transformation equals job cuts, branch closures
Ah, transformation, a consultant’s favourite buzzword. Throw digital into the mix and it’s party central…Well, for some it is. 2016 saw a number of incumbent banks step up their digital transformation initiatives and, in most cases, this resulted in huge job cuts and branch closures.
Increasingly, digital transformation projects looked like convenient excuses for the likes of Deutsche Bank, ING and Lloyds Banking Group to slash costs and drive up profits, whilst trotting out the party line, ‘what can you do? customers increasingly bank online’. But you can’t cut your way to digital innovation; at some point, you have to think about your whole business model. To be continued in 2017…
2016: buzzwords ahoy!
Here at IBS Journal, we like nothing more than a game of FinTech Buzzword Bingo. Ah, hours of fun. Our personal faves this year: RegTech, InsurTech, PayTech, Fincumbents, BaaS and Disruptopia (that last one was a joke, or was it?)
FinTech: does the backlash start here?
Funding levels continued to rise this year, whilst banks scrambled to work with or buy cool startups, but FinTech, once so full of promise, ran the very real risk of becoming like everything else. In our September issue, Group Editor, Scott Thompson, wrote that it had “become something of a cottage industry over the past couple of years. Yet another (sigh) online news service is being launched. Everywhere you look there are listicles, thought leaders, bloggers, accelerators, incubators and
www.ibsintelligence.com © IBS Intelligence 2016
theme parks...OK, I made the last one up (although it wouldn’t surprise me if someone somewhere is prepping FinTech World, fun for all the family!), but you catch my drift.”
A lot of people have done very nicely, thank you, by pushing hard the gospel of innovative new entrants shaking up an establishment hampered by creaking legacy IT systems, but the reality is that many of these ‘disruptive’ startups are operating at a loss in order to gain market share and in the best case scenario will be eaten by dinosaurs.
Cynics argue that most FinTechs are fuelled by hype. They are too small to threaten existing players, win over risk-averse customers in significant numbers and conquer high regulatory barriers to market entry. They’ll therefore need at some point to partner with banks or sell up and ride off into the sunset.
Take German FinTech upstart Fidor Group, which has been acquired by France’s second largest banking group BPCE. Telefonica Germany recently launched a mobile banking service. It teamed with Fidor Bank on this, effectively using its licence as a springboard into the financial services business. It’s a win win arrangement as Fidor Bank needs scale: its customer base of about 100,000 in Germany is not giving Commerzbank sleepless nights, but chuck in Telefonica’s 43 million customers and, well, you can guess the rest.
One might argue that FinTech is nothing new. The banking sector has seen hugely important innovations in the past, such as credit and debit cards, ATMs and online/mobile banking. These made a big difference to customers’ lives, but they did not dislodge the big hitters, if anything they made them stronger. Incumbents just
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