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@Colin Piri : In case you're stating an opinion, I can corroborate that it's a fact. The head of the committee that mandated 2FA for online payments was rumored to have gotten the plum post because he was a professor in a prestigious university. He had only ever shopped in the five stores located in the tiny shopping complex inside his university campus and had always paid with cash.

Sad but gentle reminder that Commercial Real Estate didn't become a $10T industry by landlords blinking first.

There's a long held belief in Finacial (sic) Services industry that borrowers with middle initials are more creditworthy. Has your AI / ML model been used to validate - or invalidate - this belief?

It's not just UK. It's not just Digital Bank. This is a common marketing challenge for virtually all products in almost every geography in the world. The standard response of most product suppliers is "buy me, you'll understand what you've been missing". Sadly it doesn't work because the standard customer response is "tell me one good reason why I should change from my existing product without having to buy the new product".

Ergo the "10X better than incumbent" theory in product management. Certainly no Digital Bank app is 10X better than traditional bank app. Besides, there are many other advantages of staying with traditional bank (such as safety of money). Not surprisingly, neobanks have barely made a dent on traditional banks - and I am talking about UK only.

In fact, one of them recently reported that its continuing operations is at doubt. It nicely made Covid-19 the fall guy for fundamental flaws in its business model.

Reluctance to switch banks is down to customers not caring as much for the better digital experience (purportedly) offered by new digital banks as the new digital banks assumed. Which resonates well with what I suggested in my previous comment.

Joris Lochy: 

TY for your detailed response. 

Fincumbents have been supplying technology to Banks for ages. That technology is meant to primarily benefit Banks.

If Fintechs slip into Fincumbent mode, their technology will continue to primarily benefit Banks, as I pointed out in Fintech Shouldn’t Stop Chanting The Disruption Mantra. In other words, TBH, that kind of technology will NOT primarily benefit bank customers.

If a Fintech operates like a Fincumbent, and still owns the customer relationship, that would be a genuine case of blurring the line. But I can't think of a single example of a Fintech that does that.

In its present form, I'm not too gung ho about EU-style Open Banking doing *anything*, let alone something as drastic as redefining supplier-customer relationships. 

BaaS captures the aaS zeitgeist very well. Ergo, I expect it to click in the market. But, as a repositioning of fairly old constructs in the fincumbent industry like "bank in a box", "covisioning", and "whitelabeled banking", I don't see it altering customer-supplier relationships in any significant way.  

Kudos to Monzo for using the pandemic as the fall guy.

I know this is the party line and I myself believed it a few years ago. But, despite supporting a significantly more frictionless onboarding journey than traditional banks, neobanks have not made any dent on traditional banks despite being around for 10+ years. And, when a pandemic strikes, $2T of money flows to megabanks. 

I'm really beginning to question if customers really bother so much about sending documents for verification during account opening. What's a few more days for a lifelong relationship. If they did, fintechs won't be facing the kind of threat to their survival as many of them seem to be these days.

I remember a time when nonbank startups - neobanks, fintechs, PSPs and online P2P lenders alike - threatened to kill traditional banks despite holding master accounts at traditional banks and running off of traditional banking rails and lending traditional banks' monies. The fact that JPMC's pulling out of lending agreement with OnDeck led to tumbling of OnDeck's stock price should be a sober reminder of the sheer idiocy of their threats. But this won't stop them from continuing to make those threats, at least in private. VC funding for the Internet, on which they all these nonbank startups depend, still values disruption / displacement over creation. There's no way these startups can raise VC funding at frothy valuations by claiming that they will partner with banks. Interesting times ahead...  

Good article. Resonates with my definitions in Why Banks Will Never Catch Up With Fintechs. I've been involved in selling IT to BFSI for 30 years. I'd love to believe your claim that "digitalization and adoption of new technologies has impacted the full financial services industry". For decades, revenues from FinServ for many IT companies topped that from all other industries.

However, I totally disagree with your inference that "there is no line anymore between banks, Fintechs and traditional banking software vendors." For 30 years, and even before that, the line was extremely clear: Fincumbents knew their exact role, their fortunes were joined at the hips with the thriving and flourishing of traditional banks.

It's the flopshow of these new-fangled fintechs that's causing the line to blur. These fintechs required VC funding. Much of the venture capital opportunity in Internet has been in displacement, not creation. Fintechs had to chant the disruption mantra to attract capital. While they succeeded in raising capital at frothy valuations, they failed at their core mission to kill traditional banks. They'd sound silly repeating their 10 year old charter mission in public today. But they still need VC funding. So they can't stop claiming that they will kill banks in private. This put them in a bind. That has caused the blurring of the line. Not the impact of tech on finserv, which is well known for decades. 

This blurring in line serves fintechs, not banks. Banks don't attend the conferences of all their supplier communities. Likewise, they shouldn't attend fintech conferences. It's the job of these conferences to screen the fintechs. Once they've surfaced the best fintechs, banks should meet them in private to know more about their offerings, as they do with all their other suppliers.

Banks are not stupid to give preferential treatment to people who promised to kill them in public until recently and continue to do so in private.