The Financial Industry in the Digital Era
The financial industry is in the midst of catching up with the digital era. This sector had been quite stagnant technologically, till about 8 years ago, when after the subprime crisis, laid off workers from the financial industry decided that they can create better banking services from outside the banking industry, and created financial-technology startups (aka fintech). Since then, there are 12,000 estimated fintech startups, and the vast advancement in this sector has even been referred to as "The fourth industrial revolution".
While the banks and the fintech startups have learned to work together, and banks have learned to "fintegrate" the innovative technologies developed by these startups into their system, in the background, better advanced technological developments are also being created by the technological giants also known as GAFA (Google, apple, facebook and Amazon). These companies are creating innovative advancements in the financial sphere, with facebook allowing money transfers via messenger, amazon creating Alexa banking capabilities, and amazon-go as a payment alternative, whila apple has introduced apple-pay which allows paying without a credit card.
Add this to Bill Gates famous saying "Banking is necessary, but banks are not" (1994), and you can understand why banks are trying to catch up with the technological developments available in other industries. There is much to say about the long way financial companies still need to go in order to stay relevant, if and when GAFA will be able to give the same financial services to customers, but at a lower cost, mostly due to different business models, but the main question is "what should banks do in order to better advance, and be ready to be in competition not only with other banks, or with fintech startups, but rather with GAFA, and their ability to create systematic innovation that offers high value to customers, mostly free of charge to the end customer?"
In this series of articles I will go over a few of pointers that can help banks and financial institutions move ahead faster, and offer services good enough to withstand competition with banking services offered by the International Financial Giants.
1. Create the next level of technological services before these services are created by GAFA. One example is to move on to the next UI, which is Conversational Interfaces, also referred to as messaging chatbots. There are some interesting developments in this field, and hopefully more to come.
2. Make better use of the big data that exists in the banks. "Data is todays oil", and who has better data than banks? They know what we buy, which vendor we transfer money to, how much our salary is, where we work, how much we paid for our car, what our house is worth, and how much our mortgage is. Can you imagine what can be done with this data, and why GAFA are so eager to offer banking services for free?