LHoFT CEO Nasir Zubairi recently addressed the Financial Stability Board Report titled ‘Fintech and market structure in financial services: Market developments and potential financial stability implication’, which looked at whether or not ‘Bigtech’ companies represented a threat to traditional financial institutions.
You can find the full report here.
The report highlights confidence that technological innovation has great promise for the provision of financial services “with the potential to increase market access, the range of product offerings, and convenience while also lowering costs to clients”. It also touches on the question of competition coming from technology giants (‘Bigtech’ companies), where competitive impact on the financial services industry may be greater than that of Fintech firms.
That said, the subject is too complex to examine purely through a lens of competition. The opportunities for Bigtech and banks to collaborate, leveraging each other’s strengths, is much more promising. Nasir explains:
“Reading the report, the text, though not being explicit, talks to the ‘Bigtech’ threatening traditional institutions in distribution. That I can foresee – the likes of Google, Amazon, Facebook, Apple, etc, have true customer loyalty.
I doubt any Bigtech firms would look to threaten traditional financial institutions on the product and banking side; regulation is too cumbersome to risk damage to their core businesses. Likewise, others such as Google see banks as a core customer and do not want to compete with them.
This suggests a business model shift that I have talked to for some time; banks need to consider becoming platforms, and using channels to service customers, not try and serve them directly. Banking core competence is in compliance, back office processing, risk management and balance sheet management. I could see some of the winners in the next ten years focusing on these areas and gradually giving up the touchpoint to the customer to those that better understand customer service and digital distribution.”
Comment originally contributed to a Paperjam article covering the report’s release.