Fin-Wrech: How FinTech upended the banking sector

Fin-Wrech: How FinTech upended the banking sector


Ever since the days of Tellson’s Bank in A Tale of Two Cities, banking has long been perceived as one of Britain’s most byzantine institutions. Described by Dickens as a ‘triumphant perfection of inconvenience’, Tellson’s Bank epitomised the foggy backroom dealings, gratuitous customer service and paralysing inefficiency synonymous with today’s banks.

Now, however, the Victorian hangover is starting to dissipate. In the wake of the digital revolution,’ FinTech’, or Financial Technology, has emerged as a leading disruptor of one of the world’s oldest industries. As traditional brick-and-mortar style banks scramble to compete with the arrival of FinTech, the battleground has moved away from the High Street to the Internet. Competition has never been so fierce.

Over the past 12 months, traditional banking sector jobs have waned in the face of a strong jobs market. According to recruitment site “Joblift”, job advertisements for traditional banking sector jobs fell by 3% in spite of the overall jobs’ market climbing by the same figure. This drop, compounded by the fact that FinTech job advertisements have risen by 9% in the same period, paints a bleak picture for the future of traditional banking. Major retail banks including Lloyds, Barclays and Santander have struggled to adapt to the increasing demand for mobile banking as smaller, agile FinTech firms have moved into this space. Given the simplicity of the banking services such as savings, lending and business services that underpin these FinTech firms, it makes banking a low-hanging fruit in the age of disruption.

The majority of finance sector executives agree. According to a PWC report, 73% of executives perceive consumer banking as the most likely to be disrupted by FinTech and nearly 70% predict a loss in market share for these banks. Hampered by huge back-office operations and brick-and-mortar branches, consumer banks have been sluggish in their transition towards digitalisation. To compete with the UK’s FinTech sector, which attracted £1.34 billion in venture capital funding in 2017, consumer banks have launched their own mobile peer-to-peer services such as Barclays’ ‘Pingit’ service. Through this mobile-first approach, traditional providers are seeking to re-engage with their customers, but thus far they have failed to attract consumers away from more popular services like Monzo, which offers a greater selection of services including a monitor for daily spending and monthly budgeting.

For start-ups and traditional banks alike, over 90% expect growth in the usage of mobile applications; much higher than any other financial sector. Traditional banks have responded to this forecast of mobile growth with a record number of closures last year. Across Britain, 762 branches shut, leaving Britain with around 8,000 banks nationwide. These closures have disproportionately affected rural parts of the country, where access to banking is becoming increasingly limited. Herein, the effects of FinTech become more pronounced; while younger people are able to switch to mobile banking with relative ease, older people are less inclined.

Thus far, the Big Five retails banks are yet to find a solution to this problem.

Over the past two years, FinTech has enjoyed unfettered expansion in the City, but Brexit remains a looming threat. Without access to the single market, FinTech startups will lose the right to sell banking services across the bloc, which could lead to an exodus from the Capital. Recently, the Prime Minister stated that Britain will leave the Customs Union and have reduced access to the Single Market. Although this announcement will provide little cheer to the ‘FinTech’ community, it will ultimately depend on how much this access is reduced that will determine their future in Britain.

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