How Smaller Financial Institutions Should Engage With The Digital Revolution
We all know that digital change is transforming the banking industry. Today two main contenders lead this revolution. On one side we have the incumbent large banks – established players with deep pocket, lots of customers, huge legacy issues and out-dated ways of dealing with customers. On the other side we have the FinTech challengers with less money, fewer customers (for now) and great new ways of providing value. Both players are incentivised by same things: technological change, real process efficiencies, growing customer demand and increasingly demanding regulators.
Lately, we are seeing this confrontation morphing into a cautious collaboration. The two parties are slowly coming together: the incumbent are buying challengers (see BBVA buying Simple, Atom and Holvi and BPCE buying Fidor) – and sometimes even the reverse happens with challengers buying the incumbent (see Tandem buying Harrods Bank). When acquisitions are not viable, the big banks are creating funds to invest in the most promising FinTechs (see Santander Innoventures or Uncredit EVO). Lastly, the big banks are even helping to create challengers by backing accelerators, incubators and innovation labs (see Commerzbank Main Incubator or Barclays Techstars just to name a few).
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