Sibos’ online event.
The panel, technological revolution in financial services, looked at how change is a constant theme in banking and financial services with heightened regulations and technological disruption and changing demographics.
But while the industry is always on the move, the panel highlighted the importance of trust in this space. The financial sector is characterised by waves of expansion and consolidation in response to both short-term shocks and longer-term structural forces, the panel explained.
It noted that these forces are lowering barriers to entry and increasing competition from within and outside the industry.
Despite the importance of trust, one panellist highlighted that the industry was initially “quite skeptical” towards the potentially disruptive nature of fintechs but this is beginning to change.
R. Jesse McWaters, global head of digital policy, Mastercard, explained: “The industry was skeptical towards fintechs as they couldn’t acquire the necessary scale they needed, and prior to 2008 they were unsure they could meet the complexity around regulation.”
“We have seen that regulators are surprisingly keen to engage with fintechs to bring them in as a new source of innovation. This provided the seeds for individuals to invest more trust in these institutions,” McWaters said.
It was highlighted that from 2015 banks saw a shift from “complacency to palpable anxiety and they realised they were in for a serious fight and there would be major changes in the way they would run their business”.
Technology such as cloud and software as a service (SaaS) has become more prominent in recent years. Panellists predicted that the role of cloud and SaaS is going to become even more significant moving forward.
The panel also discussed the challenges regarding financial services and fintechs, and whether they will remain in 2021.
Greg Wilson, president at a consulting firm, said: “I think the challenges are on the flip sides of the same coin; how do banks and challengers continue to innovate and serve their customer base in a way that is customer friendly, profitable and responsible, and how do they do so prudently from a regulatory perspective?”
“For regulators, it is the flip side of the coin; how do they allow this innovation to flourish by the institutions they regulate, serving the end user and supporting economic growth for the larger financial sector? But once you assume and act on those challenges I think the opportunities are quite real.”
Wilson noted the opportunities include the ability to compete and grow business, manage costs, and use technology to increase efficiency.
Additional opportunities include compliance in terms of larger risk management issues or operational risk management.
“Complexity and technology has a role to play in simplifying our very complex lives. There is a role for technology to play here. Regardless of where you operate, technology and regulation is going to be an issue that institutions and customers are going to have to understand and address,” Wilson said.
Concluding the panel, King said: “Partnerships between banks and fintechs is the winning combination that will deliver a superior end customer experience. Ultimately we don’t see banks and fintechs as rivals, we see them as complimentary with different strengths.”
“Banks have large customer bases, expertise, capital and scale. But banks have been product focused and product centric but now the focus needs to shift more onto customers.”
“Fintechs are better at focusing on customers; they use technology to fix pain points. Fintechs are customer centric and not product centric – bringing these two together [banks and fintechs] will provide a better experience and the customer will benefit,” King concluded.