The fintech ‘tipping point’ is imminent

The retail banking sector is making its way towards a ‘tipping point’.

The fintech ‘tipping point’ is imminent

According to Bill Sullivan of Capgemini, ‘[fintechs] are starting to take small pieces away from the banks and raising expectations, placing more challenges on the bank’. What is causing this shift?

According to the World Retail Banking Report 2016, nearly two-thirds of customers across the globe are using products or services from fintech firms. Penetration is particularly high in the emerging markets and among younger customers, but is expected to increase in all geographies and ages, showing a move towards bank disintermediation.

Furthermore, the research, produced by Capgemini and Efma, stated that 87.9% of respondents completely or somewhat trust fintech firms across all regions. This is quite worrying for banks considering that 70.3% of them considered customer trust as their greatest strength.

In addition, customers are more likely to recommend their fintech service provider over their bank (54.9% versus 38.4% worldwide). The highest tendency of this (67.2%) was in Latin America.

Bill Sullivan, head of global financial services market intelligence at Capgemini, said: “Historically, banks have been a bit slow to react and they’ve had a number of factors on their side. They’ve got scale, regulations and they’ve generally been able to adapt to change at a slower pace without negative implications. Two factors are changing that now.

“Customer expectations are on the rise due to players like Google and Amazon and customers are translating those expectations to financial services. Technology is accelerating at an advanced pace. Fintech players are getting hold of funding and able to move quickly and while I don’t think fintech will take over the world; they are delivering very successful niche pieces across the value chain. They are starting to take small pieces away from the bank slowly and raising expectations, placing more challenges on the bank.”