Of course I’m gonna bang the drum. But my subjectivity can’t obscure the runaway train of full-on total banking market disruption. It has left the station. It is hurtling towards the banks who are, by and large, still looking down the other track.
Where to start? How about a quick reprise on the incumbent banks? Well, “in no particular order”: legacy IT which prevents fast innovation, nasty fines for being very naughty, ghastly new capital loading requirements, pressure from Government and regulator
to get rid of the not-so “free current account” mess, reputational and ethical issues, exec pay and bonus crisis, interminable low interest rates making current accounts for 60% of customers unprofitable, impossible regulation and cost, and an operational
model out of the 1950’s. (ran out of puff but that’s the pick of the bunch).
Let’s also look at the gathering pressure around financial inclusion. In a nutshell every political party has a bee in its bonnet about the impact of under-banking about 9m customers. High charges, obscene penalties, low access to services and products
that wealthier customers get, poor customer service and so on. You will see the impact of this in the forthcoming election manifestos, ranging from opening up infrastructure to competitors, to reducing prices of use of infrastructure, to increasing competition
and even breaking up the Big Bad Banks. The Financial Inclusion Commission is writing its own analysis for publication shortly (http://www.financialinclusioncommission.org.uk/) and one suspects
it won’t make happy reading for the Guardians of the Status Quo.
It’s not just the financially excluded though who will be getting a new and better range of services. The new Payments Regulator will be weighing in too, to loosen the grip of the major banks on their ownership and access to the vital services such as Faster
Payments and Direct Debit as a priority. That means lots of new and fast competitors for the profitable business areas that the banks love. Gulp.
If that weren’t enough the Competition Markets Authority is conducting a full blown enquiry into a wide range of (alleged) anti competitive practices in banking. Business banking and consumer banking. It will be comprehensive and potentially seismic.
The banks will need to take pre-emptive action in 2015 to head off what they can by implementing change before they are forced to.
Then there is the dreaded PAD, the Payments Account Directive from the EU, which became law in 2014 and gives the banks till end of this year (I think? Help, anyone know?), basically, to reinvent much of what they do, or else….(worth a read if you have a
sleepless night at http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32014L0092).
And finally there’s the inconvenient arrival of a new generation of customers for whom old brands are pretty naff, but engagement and interaction is Where It’s At. Inconvenient to say the least if you are a bank.
It all adds up to a pretty potent brew and 2105 will see the cookie-cutter nibbles into the Old Bank Empire turn into a feeding frenzy. Small smart fintech companies are going to attack from every angle, in every segment, in every service.
It’s not over yet, but it will be within 5 years. And 2015 will be the year it really kicks off.