Whichever way you look at it, large numbers of bankers will lose their jobs due to the fintech revolution. Banks are one of the last bastions of the ‘big’ private corporate world. Their near monopolistic hold on our finances has been protected by legislation and regulation. However, this is about to change as a whole bunch of internet challengers move into their traditional space. Venture Scanner found more than 1,000 companies operating in at least 17 traditional financial sectors. Of these 481 have announced aggregate funding of at least $15B. Hopefully, this will be a good thing as an immense pool of talent currently deployed by the banks will shift to more productive pursuits. What might be a bad thing for bankers will undoubtedly be to the advantage of the consumer. Here are a few ways in which the fintech revolution will play out;
Efficiency gains – Artificial Intelligence and machine learning will hollow out the financial sector by automating the jobs normally carried out by skilled professionals. Even jobs that we currently see as being highly skilled will be performed more efficiently by machines. We will see large swathes of middle management in fields such as insurance and trading made redundant by the widespread adoption of sophisticated algorithms.
Customer experience – Nimble challenger services delivered through an efficient mobile UX will revolutionise the customer experience. Providers such as Squirrel, Square and Moni are already chipping away at the banking sector by providing a better customer experience at a lower cost. The consumer now expects to be able access services when they need them and wherever they are. The Uber-isation of our lives demands a far higher level of service than the banks have traditionally been able to provide, but in turn this higher investment in platforms reduces other bricks-and-mortar expenses.
Reduced transaction costs – Technology platforms can achieve large economies of scale across specialist activities. Providers such as MangoPay and Funding Circle can focus on bringing down costs within specific sectors in a way that banks cannot. The consumer will benefit from lower percentage costs for a whole range of services from foreign exchange through to money transfers and loans.
The bankless society – The Blockchain has the potential to radically transform the banking sector. As challengers nibble away at the non-core activities of the banks, the hollowed out structures will retrench to old style services. However, without the additional value add consumers will have little loyalty and would rather turn to peer-to-peer banking in the cloud. This will be made possible by technologies such as the blockchain and crypto-currencies.
Customer perception of the banking system has never been less favourable. At the same time we are experiencing a fintech revolution where a new breed of popular services are rapidly emerging. The banks will try to leverage this technological change to their advantage, but their monolithic structures and highly regulated environment crushes all innovation. Few of us will feel sorry as fintech marches forward to provide us all with a better experience at a lower cost, however meeting skills shortages in these specialised industries is the real challenge at the moment.