Cooperation, competition, new banking entrants … and for banks, top-line risk.
For banks, the landscape is getting crowded. A report earlier this month from Accenture has estimated that the range of financial sector upstarts — from challenger banks to FinTech firms, to new tech firms coming into financial services — will disrupt top-line growth for entrenched financial institutions (FIs). The report found that these new entrants are grabbing up to a third of new sales, which hampers competitiveness for traditional players.
The findings come as Accenture looked across seen markets and 20,000 firms to find that the overall level of institutions has declined from 24,000 companies 13 years ago to less than 19,300 — and one in six companies currently operating have come into the market since 2005. The study also found that the threat to FI top lines is on the rise.
For example, n the United States, new entrants are 19 percent of FIs and have grabbed 3.5 percent of industry top lines. In the United Kingdom, according to the report, about 63 percent of companies are new entrants, which have captured 14 percent of total banking revenues. Roughly half of the banking and payments firms in Canada are new players, yet they have captured a relatively small 2 percent of banking sector revenues. Taken as a whole, said the report, in Europe (and including the U.K.), 20 percent of banking and payments firms are new competitors and have as much as 7 percent of total banking revenues, garnering about one third of all new revenue logged since 2005.
High Street Still An SMB Choice?
Elsewhere, despite the insurgency from these tech-nimble upstarts, in the U.K., there are at least some segments seemingly cautious about tethering their futures to FinTech firms. As noted in this space last week, challenger banks and FinTech firms in the U.K. that focus on small to mid-sized businesses (SMBs) have not been able to get the traction that might have seemed low-hanging fruit.
A report from Unisys found that trust remains key when it comes to SMBs choosing financial services providers, and one third of those firms that have been reliant on mobile means to conduct financial activities had difficulties with providers. In an interview with PYMNTS, ANNA CEO Eduard Panteleev said that challenger banks have not had the traction that may had been expected, due in part to their relatively new entrance into the markets and the fact that smaller firms are not fully aware of what is on offer from challenger banks.
Separately, in terms of individual company initiatives, Bloomberg reported that JPMorgan Chase inked a data-sharing agreement that, in tandem with Plaid Technologies, will let the company’s customers “more easily push banking data” to apps. Plaid connects banks with those apps, will access the consumer data through JPMorgan’s API, and, as Bloomberg stated, will download that data without storing consumer names or passwords. The data will be sent to FinTech firms that include PayPal and Venmo, allowing those companies to see items such as bank account balances and other data.
In an interview with Bloomberg, Paul LaRusso, JPMorgan’s head of digital data sharing and aggregation, said the deal is a “compromise” in terms of data sharing, one where “customers can see who is using their data and how, and they can also control it. It achieves the goal of giving customers a way to safely share their data with third-party apps.”