Magazine article American Banker

Big Banks Will Look More like Google by 2025

Magazine article American Banker

Big Banks Will Look More like Google by 2025

Article excerpt

Byline: Don Raftery

In the ongoing battle of big banks versus fintech companies, there will be an ultimate victor: the incumbent. By 2025, leading banks will operate as digital financial superstores that blur the line between technology companies and banks.

The banking transformation process, years in the making, is only accelerating due to the recent rapid change in customer expectations. One-click ordering from Amazon, tracking fulfillment requests from Uber and other innovations are altering business customers' perceptions about what is possible and what is expected in e-commerce. These tech companies are setting new standards. Bank customers likewise expect their banking interactions to be easy, fast, transparent and on their own terms.

Up until now, the nonbanks have been leading the way to redefine the digital banking experience at a time when incumbent banks have been buried in regulation and cost cutting that has made onboarding, loan applications and other standard functions more difficult, time-consuming and frustrating. Such troubles have created an opening for nonbank lenders and fintech providers to leverage cutting-edge technology and their own largely unregulated status to deliver the type of service and experience consumers have come to expect from the best Internet and mobile sites. That said, it is tough for new providers to reach scale, so partnerships with, capital infusions from and acquisitions by banks are accelerating at a rapid pace.

And ultimately, these very same pressures are pushing banks inexorably toward a new model where banks will feel and operate more like tech companies with banking licenses. About 65% of banks' technology spending -- funds previously focused on new products and enhancements -- was deflected over the last 24-36 months to address regulatory gaps in compliance, risk, security and fraud. …

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