A new report on the UK banking industry has identified Fintech startups as a key potential disruptor in the eyes of the industry’s biggest participants. The recently released MoneyLive Banking Report compiled by Marketforce LIVE concluded that Britain’s banking space sees such startups as a “significant threat” to their business models, after consulting with 600 prominent figures from across the industry.
The report polled respondents in an attempt to find out how traditional financial institutions view the growing prevalence of services provided by fintech companies in relation to their existing customer base and future business prospects.
Better User Experience and Brands
According to the data presented, 81 percent of respondents believe that customer experience and service quality are bigger drivers of consumer acquisition and retention than trust in large institutional brands. Adding to the dilemma faced by British banks is the fact that 79 percent of them also believe that fintech startups have “more engaging brands”.
Perhaps unsurprisingly, 59 percent of respondents agreed that customer-facing fintechs have the potential to replace them altogether or at least pose a “significant threat” to their relationship with customers if their models do not change substantially in the near term.
Corroborating this, an excerpt from the report reads:
Almost six out of ten (59 per cent) of the bankers we surveyed perceive new intermediaries to be a significant threat to their relationship with their customers…From Amazon to Airbnb, Netflix to Uber, the story of digital disruption has not ended well for those incumbents unable to match the personalised experience and compelling cost savings of the newcomers.
71 percent of survey respondents also agreed that in terms of brand messaging, banks have not kept pace with consumer priorities regarding speed, simplicity and convenience. Despite this, the report notably reveals that there is no consensus regarding what the fate of banking services will be after fintech disruption achieves the projected critical mass. 31 percent of respondents expect challenger banks to benefit the most from the disruption, while 30 percent believe that fintechs will take over from banks.
In the meantime, the banks expect that fintech adoption will continue to race toward a critical mass of majority usage as illustrated in the figure below.
Based on the perceived threat posed by these Young Turks along with their growing and seemingly unstoppable adoption over the medium to long term future, fully 93 percent of survey respondents agreed that over the next five years, their business and revenue models will have to undergo fundamental changes if they are to survive and co-exist with fintechs.
The full MoneyLive Banking Report is available here.