Digital innovation is transforming industries across the board. Banking is no different, with the recent wave of digitization clearly leaving behind an indelible mark on the industry. This has meant that fintech start-ups that were on the sector’s periphery have shifted towards its core. This digitization has taken the form of bringing in a substantial change in the sector as its premise of offering a previously exclusive service to a large user base at fraction of the cost has made inroads into the existing client base of the sector. The reaction from the banking industry is typical to what incumbents display when there is a technological shift in the industry. The incumbent either goes into denial about the customer’s desire for a better service or product or questions the new entrants’ ability to generate sustained profits working in a low margin environment.
If recent changes in the music, photography and mobile phone business are anything to go by, it is clear that those who don’t adapt to the changing environment are more likely to be condemned to the past with no relevance whatsoever in the current environment. Therefore, the banking industry has to adapt to the changing tide and forge partnerships with technology partners that can help the banks get their services across to those who were previously inaccessible.
This will not only keep the banking industry relevant in a rapidly changing environment but also open up new revenue streams via the creation of new products and services. What existing banks lack in innovation they make up through their years of existence with required licensing and regulatory requirements along with the capacity to fulfill the financial needs of the customers.
Forging new partnerships can prove to be beneficial for the incumbent as well as the newcomers, helping the existing players reduce the mounting cost pressures and increasing their operational efficiency but also allowing the newcomers to remain part of the bigger picture in the long run.