There is absolutely no doubt in anyone’s mind that how the realm of digitization has globally captured this era, with both technology as well as advanced analytics spiking ahead in every industry and Banking arena is not anything new to it.
In fact, on popular demand and changing financial as well as Banking landscape has built up in such a way that, the Banks are left with absolutely no prospect, however, to adopt the digitalized banking within a core pathway if they wish to participate, as well as mass digitization is no longer a prospect but an inevitability.
The BigTech as well as FinTech are hugely empowering upon Banking arena swifter than ever it was, and in fact is proving hostile to extract the conventional banking systems old-fashioned.
As per the statement provided by Paul Kayrouz, FinTech and Financial leader at PwC Middle East that the “Digitalized banking is not a static concept but a diverse spectrum, and distinct banks necessitate upon to adopt where on that spectrum they wish to place themselves. All of this is really a striding stone to where the real forthcoming of banking lies – in platforms.”
The notion of Banking as A Platform (BAAP) is comparatively newer but has got an enormous potential. Platform banking would offer a digital marketplace for banking (and perhaps even non-banking) services, progressing the restrictions of what it can provide.
Yet, this target is not easily attainable, and banks have many aspects to consider before undertaking such a venture.
By this article, let us now ponder upon regarding how the incumbent banks can station out themselves from the menace of entry of the BigTech’s as well as Fintech’s, and how they can offer themselves the chief returns to position themselves atop.
Digitalized Banking and what it is really?
Within this era that is completely taken over by digitalization, the modern Digital Banking depicts as the complete making digital the banking services, thus, as well as exclusion of requirement for clients to not physically visit any bank branch and at convenience of just a click.
In the background of a global pandemic, the conventional banking systems have become outdated and is soon to be extinct. Clients require the competence, approachability, and request crucial banking services in a substantially safe manner. This is exactly where BigTech firms and FinTechs are offering out the conventional banks a run for their finances.
The giants of the Tech world Google, Facebook, Amazon, as well as Apple are contributing a lot for the Banking as well as Financial service merchandize directly for an ease for the clients, with the convenience of click of a button from even remotest place.
The Big Tech firms influence their vast clientele foundation and could just create upon an existing set-up to offer a widespread variety of digital merchandize and services to clients. This poses a grave menace to the conventional banks.
While virtuously digital banks do prevail (for an illustration: – The Anglo-Gulf Trade Bank in the Middle East and The Revolut in the UK), obligatory banks are also electing to approve a better digital approach, and swiftly making the inroads, with anticipations to strive. This is a no relaxed accomplishment and necessitates two seemingly contrary aims to be accomplished.
On the one hand, banks require to accomplish the swiftness, agility, and suppleness innate to FinTechs. However, at the same time, they must remain to manage the scale, security ethics, and regulatory necessities of a conventional financial-services enterprise. This launches a diversified spectrum in digital banking, with numerous banks approving digitization to fluctuating degrees.
How the Conventional Banks can still mitigate the threat and be driven?
There are innumerable stances when the banks can moderate the threat of new entrants in the financial services industry. Apple acknowledged this prospect by partnering with investment bank Goldman Sachs to unveil the Apple Card, an innovative digital payments resolution, which also dodged certain governing mandates.
By banking upon already prevailing banking infrastructure, tech firms can emphasize on what they can do their best – offering the novel merchandizes – while still being able to strive with conventional banks – and a mounting number of firms now consider this to be the subsequent logical step to add diversified merchandize to their core business models.
The FI-Fintech affiliation produces a symbiotic ecosystem for both companies to coexist and linger to stay relevant. In October 2020, HSBC launched Contour, a blockchain trade finance platform which is funded by Citi, HSBC and Standard Chartered.
Similarly, JP Morgan is also in pursuit of launching an all exclusive blockchain platform where they are now challenging their digital currency – JPM coin – for the initial ever time through a huge tech client, in order to send as well as receive payments globally.
This is suggestive of how blockchain has become an imperative armament in any digital banking collection, alongside notions like that of the digital funds (for corporates) and digital wallets (for retail).
The BAAP perception
The true probability of digitization is comprehended in Banking as A Platform (BAAP).
BAAP empowers the third-party inventors to create merchandize and services for banking clients. Third parties can now encompass platform operating module while the platform itself succeeds for data exchange and manages validation.
Equally prominent, it affords banks with a prospect to create in alliances and influence new customers. With their identifiable brands and extensive ‘Know Your Customer’ research, banks can knock into an enormous market.
Incumbent banks presently account for only 30 percent of the players in the BAAP market, in large part because of the massive budget sustained by forming a platform. But, if they can trust the dependability connected with their names with new, innovative services and digital products, banks will place themselves ahead of the curve, and set themselves up for huge success.
The time to performance is just now
It is apparent that there are abundantly prospects for banking arena to participate and fast-track financial technology. In the meanwhile, FinTechs can also optimally utilize this prospect to build upon new, state-of-the-art merchandize for the latest, modern, financially savvy retail and corporate clientele list.
However, the initial, vital step to this process is for conventional banks to categorize their position on the digital banking gamut; be it through FI-Fintech partnerships, BAAP, AI or blockchain, banks can articulate a better tactics once they recognize the digital banking range.
The FinTech upheaval is set to linger to disrupt, and conventional banks must keep up with the swiftness of technology in order to remain appropriate and viable. In this swiftly sprouting, ever-changing market, it’s time to innovate, integrate and accelerate into the future.