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Fintech and banking bosses debate the potential death of banks

Edmund Heaphy
Finance and news reporter
Canary Wharf in London the HQ of many international banks including HSBC and Citi. Photo: Getty

Many of the fintech companies that are disrupting the banking sector will not be around in 10 or 100 years, according to Anne Boden, the CEO of challenger bank Starling.

“Yes, banks are here to stay,” Boden said. But she drew a distinction between challenger banks and startups that “address specific customer needs”, noting that “a lot of the new [fintech] entities coming to market don’t have a way of actually generating revenue.”

“Despite the fact they are disrupting and bringing new innovation to the market, unfortunately they don’t have a long-term profitability plan and will not be around in 10 years or 100 years,” she said.

Boden was speaking at a FinTECH Talents session, during which several fintech and banking bosses debated whether banks will be needed in the future.

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The world will “absolutely” need institutions that safeguard money, said Aritra Chakravarty, the CEO of Dozens, a London-based fintech startup that focuses on saving.

“Our history proves that you need these institutions. But whether the current institutions that provide this service are going to be the ones that do so in the future is the bigger question.”

Asking why banks make more money off their customers when they borrow, Chakravarty argued that, in banking, there is a “fundamental misalignment of incentives that is not there in any other industry.”

“It’s like having a car manufacturer that makes more profits when you have more accidents,” he said. “I think banks have failed us there.”

For Ceri Godwin, the chief information officer of Santander UK (SAN), banking was about trust and scale. Noting how banking was “the biggest interoperable ecosystem” in the world, Godwin suggested that, while legacy banks would have to adapt, they would not be going anywhere.

“Banking is a target for disruption, and actually I completely applaud it,” she said.

According to Facebook’s Russell Pert, who leads the social media giant’s fintech operations in the UK, this disruption will come by shortening the time it takes for customers to do banking.

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“Throughout history, the purpose of banks hasn’t really changed, Pert said. “What has changed is how we service customers.”

He pointed to Facebook Messenger, which has 31 million users in the UK, as a tool that could be used to “surface” the services banking customers were looking for.

Josh Bottomley, the global head of digital at HSBC (HSBC), thought similarly, noting that the future of banking was going to be “much more about the customer experience.”

But he noted that the big traditional banks would have to lower their operating costs — and said that machine learning and artificial intelligence were ways that this could be achieved.

“A lot of the backend processes in banks are still about predicting, or preventing, or prescribing behaviour,” Bottomley said. “They are all data-driven, all automatable,” he said.

But Boden thought that, while traditional banks will copy “absolutely everything the new banks and the fintechs do”, they won’t be able to copy the cost base.

“It’s no more about innovation: it’s a war about cost base. Those banks that can manage their cost base will survive,” Boden said.

“But we will see some big banks failing, and we will see some really big banks thriving in this environment — but we’ve yet to find out which is which.”

Yahoo Finance UK is proud to be a media partner for FinTECH Talents — the ultimate global fintech festival in London 11-13 November 2019. There are 3,000 festival-goers + 1,500 innovators representing over 400 different financial services institutions + Rockstar speakers & steering committee members + Over 50 hours of content sessions + Game changing tech companies + The talent of tomorrow + Craft beer and live music sessions.