What Banks Need to Do to Survive the Fintech Revolution

What Banks Need to Do to Survive the Fintech Revolution

By now, most people would probably agree that the fintech revolution is real. Startups seeking to disrupt the financial services industry cannot be ignored. While the impact that it will have on everyday life can’t be measured yet, it will be substantial.

bankingWith that said, there are still some skeptical voices. They come from individuals and organizations that represent traditional financial institutions. Since fintech is poised to threaten their continued dominance in this industry, they have a vested interest in downplaying its potential.

So, when a major financial giant advocates on behalf of fintech, it is worth listening to what they have to say.

Recent statements from high-ranking individuals at Goldman Sachs indicate that the investment bank believes that one of its fintech projects could earn as much revenue as its trading services which, in this case, involves buying and selling securities. The project, which is called Marcus, offers consumer loans online. Goldman Sachs believes that the business could earn as much as $1 billion in extra revenue over the next three years.

Staying ahead of the curve

To be fair, Goldman Sachs is often ahead of the curve technologically when compared to other traditional financial institutions. Its forward-thinking perspective differentiates it from some of its peers, who view fintech as a threat that must be stopped.

Instead, the firm has realized a crucial truth: the major value that these fintech startups offer is their technology. True, while some fresh startups benefit from their employee demographics—when the people running the company are young, they can often tailor their products and services to the specific needs of other young consumers more effectively—the primary reason why consumers flee to them is due to the convenience that their innovations offer.

At Goldman Sachs, it seems as though they understand this concept. That’s why they’re willing to embrace fintech wholeheartedly. By sharing their resources with emerging startups, they create a relationship that benefits both parties. The startups offer the technology and perspective that help to attract new consumers, while the financial institutions offer the experience necessary to navigate the regulations inherent to the financial services industry. If fintech truly is the future, it doesn’t have to be a future without banks and investment firms. Instead, it could simply be a future in which collaboration between banks and startups results in superior products and services for customers.

Surviving the fintech revolution

fintechBanks that have been reluctant to admit the threat that fintech poses simply haven’t been willing to accept the idea that it’s possible to not only survive the fintech revolution, but thrive because of it. If they invest in the right projects and incorporate them into their own businesses, they’ll be the ones offering the latest technology to consumers, instead of the ones being replaced by it.

Goldman Sachs isn’t the only major financial institution willing to accept this truth. Both Barclays and HSBC have joined the Fintech Circle Institute. This online platform is designed to help financial services professionals to better understand the kinds of technologies that are changing their industry, like blockchain and artificial intelligence.

At this stage, it appears as though both Barclays and HSBC are working on expanding technological knowledge among their current team members. This is a start. Once they establish a basic understanding of the technology, they can more effectively decide which types of innovations to develop and invest in.

Using the technology wisely

However, it’s only a start. If the banks truly want to take advantage of fintech—instead of being trampled underfoot by it—they’ll need to bring in outside experts to help them develop their projects. Understanding the technology is only one step. The end goal is to use it wisely.

This can be difficult. For a long time, the basics of financial services remained relatively constant. Now, technology is developing at a very fast rate. Even many fintech experts will admit that they cannot entirely predict what types of innovations we can expect two years from now, let alone in a decade. It’s hard to fully grasp fintech when the kinds of technologies that fall within the realm of this industry are constantly evolving.

Still, institutions such as Goldman Sachs are taking the right approach. They understand that fintech is here to stay. If they also wish stay, they need to find out how they can make use of it. This may dramatically change how they conduct business sooner rather than later, but it’s necessary if they’re going to continue dominating the industry.

Sorry, comments are closed for this post.