It’s often been said in the past few years that the biggest challengers to legacy banks are now disruptive tech-based startups that can offer innovative new digital solutions to consumers.
But a new report has suggested that in the near future, there will actually be another sector that comes forward to compete for the attention of banking consumers – major tech firms looking to expand their operations and offer more compelling customer experiences.
This is according to a report from the World Economic Forum, which noted that while fintech startups have achieved success in driving innovation, their ability to disrupt the competitive landscape and gain market share has been lower than expected.
However, efforts by financial institutions to become more ‘experience-driven’ are opening up the sector to potential competition from the likes of Google, Facebook and Amazon, the report noted.
The financial services industry already has a high dependence on these firms, as they supply critical technology to the sector. For example, dozens of financial providers rely on Amazon Web Services to support key applications and processes.
Cloud computing, customer-facing artificial intelligence and big data customer analytics were highlighted as three capabilities that are becoming critical to the competitive differentiation of financial institutions – and all three are areas where big tech companies can offer a far deeper experience than financial institutions are able to provide.
If these players were to enter direct competition with retail banks, the resources they have would make it very difficult for traditional providers to compete.
Jesse McWaters, lead author of the study and project lead for disruptive innovation in financial services at the World Economic Forum, said: “Tech giants would be able to pick and choose their points of entry into financial services, maximizing their strengths like rich datasets and strong brands, while taking advantage of incumbent institutions’ dependence on them.”
Therefore, he said financial institutions will need to walk a “challenging line” between taking advantage of the services these tech firms can offer, and becoming overly reliant on them.