If Google offered a banking product, would you sign up?
The biggest threat of disruption in the banking industry may not come from fintech firms, but large technology companies. Companies like Facebook, Inc. (NASDAQ: FB), Amazon.com, Inc. (NASDAQ: AMZN) or Alphabet Inc (NASDAQ: GOOG) may eventually make a transition into banking, said Henri Arslanian, PwC’s fintech and crypto leader for Asia.
“Large technology technology firms have the user base, they have the deep pockets and to a certain extent they have the customer trust,” Arslanian told Benzinga.
The exec asked how banks can keep up with evolving expectations for user experience when millennials expect it to be easy.
“If you have to step physically into a bank branch, it’s a failure on behalf of the bank.”
How The Financial Crisis Stalled Banking Innovation
The fintech expert said that part of the reason why the consumer interfaces of traditional banks are not on the same level as the biggest technology companies is partly due to the financial crisis.
“It’s not their fault. During the financial crisis, banks were so focused on surviving that customer interface and user experience took the backseat,” Arslanian said.
“Now the problem is during that same time all the technology players from WhatsApp, WeChat and Uber all came in, so your expectation as a customer changed dramatically.”
Technology And Traditional Banks: A Potential Marriage?
Undoubtedly, companies like Facebook and Amazon could have the potential to convert tens of millions of users to bank with them, but that does not mean they would necessarily operate as direct competition.
“They have the customer interface, [but] tech firms are not going to become deposit-taking institutions,” Arslanian said.
“They don’t want to be the back end. They just want to control the front end and leave the boring back end, settlements and compliance and treasury to traditional banks.”
How Smaller Firms Can Compete
Arslanian said banks are facing a critical moment where they need to adapt or die, and senior management buy-in is paramount.
“If you don’t have a top manager at the bank that wants to transform that is at the cutting edge and is paranoid, you’re not going to have a small innovation team try to transform a bank.”
Deltec Bank Chairman Jean Chalopin told Benzinga at its annual conference in Nassau this week that smaller banks and fintech firms have an advantage over big banks in the sense that they are more flexible and can adapt to a swiftly changing digital environment.
“Banks have never been concerned with the user experience in the past,” Chalopin said.
Now that users have choice, the biggest bank of the future could be Amazon, Google or Facebook, he said.
“I don’t know who exactly, but they will be in the bank business one way or the other. We may not call it banking but it will be the same.”
Photo by Brett Hershman.
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