Bank economists warn of disruptive threat from mobile and crowdfunding

In its just-released second quarter economic outlook, the bank's economists argue that the financial industry faces its most dramatic transformation in modern history because of increased online and mobile device usage, which will make banks more productive but also boost competition from nonbanks.

"To succeed in this new hyperconnected and competitive environment, banks will have to follow a customer-centric approach and offer simple, user-friendly and effective products, with a high level of transparency and security," chief economist Nathaniel Karp writes.

Banks are ahead of the curve in mobile technologies, the bank's economists say, after examining a 2012 Federal Reserve Board survey about mobile banking.

"Mobile banking will increase the productivity of the industry as banks will have more information and ways to efficiently target users; however, these technologies are also bringing more competitors: highly sophisticated platforms with innovative business models and very low operating costs," according to the economists.

An even bigger threat to the traditional banking industry may yet come from the advent of new crowdfunding platforms, which the BBVA economists describe as "a disruptive innovation that commercial banks cannot ignore".

They recommend that banks pay close attention to this trend, strengthening their core business and investing resources in developing their own crowdfunding models.

"For banks, crowdfunding poses a challenge," states the report. "From here on, they will face a new competitor with lower operating costs, a different approach to risk management and a simpler product offering. To what extent crowdfunding platforms will displace commercial banks in the retail and small business segments remains to be seen. However, banks should be prepared for this trend and make it work to their advantage."

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