A recent report by FinExtra and Oracle, and released to the World Economic Forum in March, discussed how the “fourth industrial revolution” has impacted sectors such as healthcare, retail and agriculture, and why the financial sector should support the movement.
“For an industry that has developed over arguably thousands of years, and which has strong economic incentives to modernize and optimize its performance, it is somewhat dumbfounding that the financial services sector hasn’t been more tech-enabled,” the report said.
Changes to corporate banking are high in the agenda, as businesses are looking outside the traditional big bank to smaller banking solutions. This is in part because smaller providers are already using the Fintech solutions needed to serve their clients, offering fast AML checks, superior security, instant transfers and real virtual-account management.
“The key focus of banks is twofold. Firstly, on reducing the cost of transactions by removing the unnecessary friction in the end-to-end process; and secondly, on meeting the demands of instant payment schemes – the bank’s infrastructure needing [sic] to process AML, other compliance and funding checks at the same pace. Clearly, digitisation has a significant role to play, as does the use of AI, Machine Learning (ML) and data analytics,” the report said.
However, there is little evidence that banks are supporting the needs of businesses. The end-to-end service is only now beginning to evolve. Banks for so long kept tech development in-house, or purchased products from suppliers. It is only recently that banks have started to partner with Fintech firms to establish real solutions; solutions that smaller providers have been offering their clients for many years.
So are banks still relevant? Are they able to catch up with other industries that have supported technological advancement to the benefit of their customers? Banking has always seemed slow to evolve, and not particularly interested in the needs of customers. Fintech solutions and banking alternatives are already being widely accepted into the mainstream. Perhaps the development of new financial ecosystems by banks will be too little too late, and the shift towards a “fourth industrial revolution” will see aged financial institutions crumble…but probably not.