The technological revolution has caused a plethora of industries to grow, transform and adapt to global changes. The banking industry is no exception with a wave of fintech companies pushing traditional banks to adhere to consumer trends.
Fintech early adopters
The fintech industry has begun to really shape up over the past decade with the City of London and Silicon Valley becoming key hubs across the Atlantic.
Innovative start-ups like Revolut and Monzo have transformed the way people spend and monitor their spending, causing shockwaves across the traditional banking industry.
Last month Revolut raised $500 million with the company valuation at $5.5 billion, while Mozno raised £113 million last June.
— Reuters (@Reuters) March 1, 2020
This demonstrates that venture capitalists are seeing significant potential in the industry, despite it only being a decade or so old.
There has also been a wave of start-ups taking on the demand of international money transfers and remittances, with fees being dramatically less than a traditional bank.
What will change?
One of the key differences between banks and these up and coming start-ups has been the user experience. The format of traditional bank statements and invoices may soon be replaced by the likes of Revolut’s gamified version that comes with its own bespoke GIFs and emojis.
Ultimately, the emerging companies within the sector want consumers to feel comfortable and even get enjoyment out of using online banking services.
"Cilla's date sent her £15 on Monzo for a bottle of wine and they spent three hours on video chat getting to know each other and playing drinking games"@cillahope_ showing us how it's done 🍷https://t.co/odtc8YUGkP
— Monzo (@monzo) March 23, 2020
They don’t want balance checking, money transfers and payments to continue being this laborious task, they want it to be instant and efficient.
Banks have started, albeit slowly, to adapt by introducing new features. Lloyd’s for example now offer customers the choice to deposit cheques via the app instead of going into a brach, which is helpful despite it only being a small step.
In 10 years time banks will undoubtedly be put under more and more pressure by emerging start-ups.
Consumers may begin to use the likes of Revolut and Monzo as a primary bank account, which will again slash margins within the traditional banking industry.
The level of distrust for banks has continued to rise since the 2008 financial crisis, with scrutiny being heaped on banks for disproportionate fees on customer overdrafts and irresponsible lending.
Martin: 'FCA subtly slaps banks' wrists – and provides some relief for overdraft prisoners' https://t.co/bVh9GlMPju
— Luke Lally (@LukeLallyQFA) March 18, 2020
With another recession looming due to the coronavirus pandemic, levels of distrust could eventually reach a tipping point leading towards an exodus.
Banks will almost certainly need to buck up their ideas and plan ahead to avoid this type of scenario, although the trend clearly indicates a clear change in consumer demand.
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