Banking is changing: Winners, losers and the new ecosystem

Now it is happening – banking is changing.

Much more interesting than change, per se, is improvement, and improvement is what we will get in banking of the future and the new ecosystem it will yield.

I have written three posts about the back-end-tech, front-end-tech and strengths and weaknesses of current actors. Now we come to the most interesting part: the new ecosystem!

In the last 3-4 years, we have seen many new actors and fintechs on the market. The market is fragmentizing. New parties, especially in payments, savings accounts and unsecured lending and also with agents like Lendo, have been very successful. Some of those companies will probably be sold to existing banks, and some of the models will, if possible, be copied by existing banks. However, it is most probable that we will enter a paradigm of “broken value chain.”

Today, banks produce, administrate, advise, sell and service in an almost totally proprietary value chain. It is very probable that we will see more parties, like Lendo, that concentrate on just one link in the value chain. The new phenomenon of “robo-advising” will also break up the value chain. “Robo-advising” is when digital robots analyze your financial picture and needs and match them with the best way to invest based on unbiased, continuously developed algorithms. The trend is experiencing rapid growth in the U.S. and is present in Sweden, too.

The future ecosystem will probably be more like a partner-system than one company handling the total value chain, both horizontally and vertically. The most interesting position to watch then, is who will be the retailer, the party with customer contact?

We will see new parties offering a consolidated view, where you can gather your economy on one “screen,” see your Santander-current account, your Swedbank mortgage, your Nordnet portfolio, your Google card, your Apple insurances and your proactive “robo-advising” suggestions. The European Commission’s new Directive on Payment Services demands open APIs, which will make this possible.

Many existing players will, of course, try to avoid and delay this course of events. But for the consumer and the market, this is excellent news. Consumers and experts will suddenly get (relatively) unbiased advising, price competition and interfaces that provide capabilities to plan and understand cause and effect from various economic alternatives!

Regarding transformations, we must remember that many factors can counteract change, including legislation, technology, customer demand, customer inertia, economic conditions, etc. To reach a stage where the new ecosystem is mature will, of course, take time, but we already see real improvements for the consumer through things like Nordnet’s Shareville, Lendo and index products.

It is a very interesting era we have entered in banking, and I am absolutely sure we will see a substantially improved situation with increased value for the customer.

And in the long run, for all businesses, that is what it is all about.

Thank you for your attention!

Patrik MerupAs a Client Relationship Executive in Banking at CSC, Patrik Merup helps clients to link business challenges and opportunities into IT solutions. Patrik’s expertise is retail banking after 20+ years in a variety of roles in the senior management team of three different retail banks before he joined the IT supplier side of banking. Patrik has MBA degree from Stockholm School of Economics and Stanford University and lives with his family in the Archipelago outside Stockholm, Sweden. Connect with him on LinkedIn.



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