Fintech: Banking's Friend and Foe In 2020
What American Banker sees as the tech challenges of banks in 2020 can be summed up in one word: frenemy. From fintech collaboration to "Big Tech" competition, the financial services sector will struggle with the challenges these digital banking startups pose.
"As a new decade begins, one of the major unresolved issues of the previous few years continues to haunt banks — when and how Big Tech will jump into financial services in a significant way," says American Banker in its look at the tech trends it expects will dominate the year for banks.
Big Tech, in the form of Google, Apple, Amazon, Facebook already have jumped into some part of the industry, launching initiatives into digital currency (Facebook), payments (Apple), lending (Amazon) and consumer checking (Google). "That appears to be just the start of their efforts.," American Banker says.
Meanwhile, firms like HSBC are partnering with fintech providers to provide online customer lending services. "Such partnerships will multiply as other banks look to enter into the digital lending space in 2020."
However, American Banker sees that even as more banks turn to fintech platform provider, "new fights between the two sides will also break out." The criticism fintechs have leveled at traditional financial institutions is heating up and is predicted to only get stronger as the nonbank tech firms compete more intensely for customers. Some of these nonbanks are moving to add a complete suite of financial services and become banks.
“When you look at [challenger-bank] strategy, it seems fairly clear their goal is to try to fill in all the unmet needs of their current customer base,” the article quotes Alex Johnson, director of solution marketing at FICO.
A consequence of digitalization is that many of the tasks handled by tellers, loan officers, clerks and others will be automated. "North American banks could save more than $70 billion through 2025 using technology to automate jobs or assist employees," according to an Accenture analysis cited by American Banker.
Layoffs in the industry have already occurred -- globally 77,780 cut jobs were announced last year. Automation and artificial intelligence will continue to obsolete jobs. Some banks have already begun upskilling their workers. But the likelihood of large scale layoffs hovers.
American Banker raises the question, "Can banks be thoughtful about digital change and blunt its impact on the workforce instead?"