As tech companies begin to compete in the financial services space and put particular focus on creating new types of account management and credit and lending products, legacy banks are starting to see their retail banking segments under threat.
- While 35% of banking executives say retail banking is a primary source of their revenue right now, by 2020, only 16% see that still being the case, according to a new survey of global executives conducted by the Economist Intelligence Unit and compiled by BI Intelligence in the chart above.
- And, relatedly, 51% of respondents believe new fintech disruptors will have the most success in retail banking-related areas — including managing accounts and transactions, and providing cash savings and deposit accounts, unsecured personal credit, and mortgage lending.
BI Intelligence, Business Insider’s subscription tech research service, has noted how many tech startups are building products and apps that serve the same functions traditionally offered by retail banks. Customers can now use third-party apps to complete cross-border and peer-to-peer transfers, look for alternative sources of credit, and make payments. As the user base of these apps grows, it could have an adverse effect on retail banking profits.
Banks feel most threatened by tech and e-commerce companies like Apple and Amazon. These companies have a long record of disrupting and dismantling incumbents, primarily because they respond rapidly to changing customer behaviours, or, in some cases, set in motion that change in behaviour:
- 36% of respondents believe established tech and e-commerce companies pose the greatest threat to the banking industry.
- At 12%, fewer see payment-tech companies like PayPal and Square as potential disruptors.
- Interestingly, only 7% identified peer-to-peer lenders as the greatest threat. This is likely because banks see themselves collaborating with, rather than competing against, lenders.
Disclosure: Jeff Bezos is an investor in Business Insider through his personal investment company Bezos Expeditions.