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Disrupt or be disrupted

That a company like Google is leading talks to acquire Softcard, a mobile payments company, heralds a shake up in the mobile payments space.

The creep of companies like Google and Apple into payments, and organisations like Tesco into banking, highlights the massive change that financial services is undergoing. Previous challenger banks have struggled to build scale and customer loyalty but these internet giants already have large capital reserves and a fiercely loyal customer base at the ready, representing a viable threat to the dominance of the big four.   

Increasingly, our relationships with banks will become dominated by technical innovation. Whilst becoming a bank is a regulatory quagmire, the big four can’t rely on the hurdles of cost and compliance to protect them from the competition. Today’s consumer has grown-up with an inherent understanding of technology and an on-demand mentality. Bugs, slow adoption or breaks in service will not be tolerated. In fact, our recent survey of 2,000 consumers revealed that online banking is the industry under most pressure from customers that expect updates to be made at least once every four months. 

Those with a tech heritage hold an advantage in the innovation game within financial services. Often freed from the constraints of legacy IT where provisioning data, developing and testing can take months, challengers can disrupt the market with simple product offerings. They are likely to already be practicing Agile Development to stand up and tear down new apps and services in weeks or even days. 

As a result, the point of contact between bank and customer will be owned by savvy start-ups, consumer experts and internet behemoths that can usurp some of the capabilities traditionally held by big banks. We’ve already witnessed the success of financial services organisations that have evolved from the retail space and used their considerable customer insight and data access to develop banking offerings that appeal to consumers on a mass-scale. 

With financial services becoming a consumer-choice minefield, only those traditional organisations developing and testing using new technology such as data virtualisation and following the principles found in DevOps will be able to continuously deliver new products and features. The big four must recognise that they only have two options left ­- innovate or fail.



Comments: (1)

Tom Hay
Tom Hay - Icon Solutions Ltd - London 02 February, 2015, 10:00Be the first to give this comment the thumbs up 0 likes

Telling banks to "Innovate or fail" reminds me of Homer Simpson shouting "Stupid TV! Be more funny!" Weighed down by legacy systems that are too complex to understand and too critical to risk changing, and dysfunctional cultures that stifle innovation at every turn, the big banks are genetically unsuited to innovation.

Instead, banks in Europe and the US are increasingly using the resource that they have plenty of - cash - to fund fintech companies that have the innovative culture that the banks lack. This co-innovation model is likely to achieve results more rapidly than trying to create the cultural transformation needed to allow banks themselves to be more innovative.

Perhaps the call to action should be "Work with the right innovation partners or fail".