Banks may be at risk of underestimating the power fintechs will hold in disrupting their processes, taking their customers and relegating them from the needs of the customer.
HAving conducted a stress test across the seven leading UK banks – RBS, Lloyds, Standard Chartered, Santander UK and Barclays – the Bank of England noted that banks were disregarding the potential sway fintechs could have over the allegiance of customers.
The UK organisations involved in the BoE study are under the impression that they will not need to make major changes in terms of leveraging cutting edge technologies to successfully compete with the third party service providers that will soon be on the scene.
Banks are about to face a colossal challenge in January 2018, with PSD2 set to potentially be the biggest change to banking since the internet. The European directive will provide fintechs with access to traditional banking customer information, making them free to provide their cutting edge alternatives.
Outlining one damaging effect that fintechs could have on traditional establishments, the Bank of England said: “For instance, in the future, it may be possible for a customer to manage their finances with only minimal direct engagement with their banks.”
With banking apps already common, a vast percentage of the population are familiar with online, mobile banking. Following PSD2, fintechs will be able to provide the customers of banks with innovative approaches than harness cutting edge technologies like AI.
Some banks are being highly mobile in a bid to innovate; HSBC for example is preparing to embrace PSD2 by working on open banking offerings. Open banking would allow customers to connect accounts from other banks, for example, providing customers with great transparency and flexibility.