Large traditional banks have enjoyed a strong position for many years, one may say a monopoly position. Everybody needs financial services, and therefore everybody needs a bank. So for many years the large banks have benefited from this strong position, and did not have a strong need to reinvent themselves.
Fintech: Data + Technology = Game Changer
And then came the data and analytics revolution. With the rise of the Internet, we’ve experienced what is referred to as “the information explosion”. So much data/information became available, that the challenge turned from having enough data to having too much data; from data quantity to data quality. Subsequently, analytics technologies became more and more wide-spread, and sooner than later a plethora of startup companies popped up that offered services around data and analytics. And while in the past there were huge entry barriers for becoming a new (traditional) bank, those small startups also started offering financial services, and were labeled as Fintech. See for example the Forbes Fintech 50 2018 list (these companies are already successful, thus no longer very small, but they started smaller).
The Future: Agility Is Key
Banks now have two options: either they understand that the world has changed and that they need to deal with a new type of competitor, one that is small, agile, tech-savvy and aggressive; or… they will continue doing what they have always been doing, and risk becoming redundant in the marketplace. Maybe that’s why we see traditional banks investing in Fintech companies too (or buying them).
To conclude, data and data analytics have created a tsunami in the traditional sector of financial services. Disruption. Data and data analytics are the key to tomorrow’s financial services.