The UK banking industry sees fintech startups as a “significant threat” to the big players in the industry.
The MoneyLive Banking Report consulted with 600 leading figures from the banking sector to gauge their opinions on the future of the industry.
Respondents identified a number of ways non-traditional financial services and new fintech companies now pose a threat to the UK’s current dominant banking institutions.
81% believed that “the consumer is driven less by trust in large institutions and more by convenience and quality of experience.” In turn, 79% agree that “FinTechs… have more engaging brands.”
In light of those findings, it is no surprise that 59% of respondents from the industry think “new intermediaries” pose a significant or massive threat to their relationship with customers.
The report suggests that the industry is right to be concerned: “From Amazon to Airbnb, Netflix to Uber, the story of digital disruption has not ended well for those incumbents unable to match the personalised experience and compelling cost savings of the newcomers.”
Competition will come not just from online accounts, but services that solve common customer problems. One example cited is fintech company Plum, which “uses smart algorithms to analyse your spending habits. As well as automatically diverting sums into a Plum ISA, the app provides helpful insights into where your money goes, sends alerts when it finds a better deal on energy bills and lets you switch to that deal in a few taps.”
The degree of change and competition provided by new companies, including both challenger banks and online only providers like Starling, led 93% of respondents to agreed that “fundamental business model innovation will be required within the next 5 years.”