When it comes to the traditional financial world as we know it, things will have to change sooner rather than later. Keeping up with the growing demand for new technologies and services is not an easy task, yet there are three main identifiers for financial institutions to address. Getting involved in blockchain technology development is not included in the list, as there is no real need to state the obvious.
Innovate Before It Is Too Late
For any bank in operation today, the mission is quite simple; innovate before it is too late. If you don’t, the competitors will. There are some noticeable improvements over the course of recent years, with banks being less slow and archaic compared to how they used to operate. One key area where banks have been rather good at is cutting out sectors that are not generating [enough] revenue.
In fact, there is a good reason FinTech startups are focusing their attention on disrupting the money transfer service. Banks will ignore this sector for the most part as there is little to gain for them regarding revenue. Instead, there will be a larger focus on consumer products and services that apply to more people, such as lending.
Oddly enough, the number of companies in the lending game is not decreasing per se, albeit the number of banks active in this sector is. Alternative finance companies and startups are the new go-to guys for lending purposes as they can offer far more competitive rates and service a wider range of customers.
It will take some time before everyday consumers ditch all bank services completely. Bank accounts, deposits, and lending will remain key elements of the sector for some time to come. Combine this with the low number of customers who change banks on a yearly basis and there is no major threat to traditional finance just yet. However, failure to innovate at an accelerated pace will come back to haunt them in the long run.
Acquiring New Customers And Efficient Operations
Two issues where traditional banks are struggling comes in the form of acquiring new customers, and making operations as efficient as possible. Whereas FinTech startups can focus all of their attention on one or two prominent services or products, banks have a plethora of financial tools they want to offer to customers.
Growing horizontally will prove to be a major challenge for traditional banks, especially where customer acquisition is concerned. There are a lot of banks out there who offer nearly identical services, and consumers will try to compare prices online and see what works best for them. Staying ahead of the competition within their own ranks is hard enough. Let alone when FinTech companies enter the fray.
There is another downside to offering such a wide variety of services; keeping day-to-day operations simple and efficient becomes all but impossible. In the end, this could lead to major struggles for both traditional financial institutions and FinTech startups as both industries will need to adapt quickly whenever the situation requires it.
By the time 2020 comes around the financial landscape will be quite different from now. FinTech startups and traditional banks are duking it out while both industries face competition from innovative payment methods like Bitcoin and other digital currencies. Interesting times are ahead for consumers all over the world and the result may surprise us all. Regardless of who comes out on top, the consumer will reap the benefits, which is the most important aspect.
What are your predictions for 2020? What type of financial world will we live in by then? Let us know in the comments below!
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