How the FinTech revolution is changing the banking industry
The rise of FinTech is forcing high street banks to re-think the way they interact with their customers.
Over two million banking jobs could be cut in the next decade, according to a new report by Citigroup.
The cuts will be the result of a dramatic rise of investment in FinTech companies, along with customers preferring to use mobile banking apps rather than visiting a branch, the Citi GPS: Digital Disruption report states.
"The recent mobile internet and smartphone revolution has created a game changer" in the way consumers interact with banks, warns the study.
Citi's findings shows Europe and America are coming to a 'tipping point', with physical branches being left obsolete by popular new FinTech start-ups. They predict that developed market banks could cut branch numbers by as much as 50% over the next 10 years.
In the past five years alone, investment in private FinTech companies has jumped from $1.8bn in 2010 to 19bn in 2015. The 'new kids on the block' are presenting younger consumers with new and innovative ways of banking.
For now, the major banks are fending them off with their sheer scale and market saturation, but with the rapid growth and investment in FinTech, "this isn't likely to continue for long", the report said.
In China, this 'FinTech tipping point' has been reached. The companies country's top FinTech companies (such as Alipay or Tencent) often have as many, if not more, clients than the top banks. This is due to a combination of a large e-commerce system and accommodating regulations.
5 FinTechs changing the global financial landscape
Founded in Edinburgh, AimBrain is a mobile biometrics platform. This firm wants to do away with passwords by tracing the way the user swipes and taps their smartphone screen to identify them.
You may have heard of Blockchain before. Founded in 2011, the bitcoin wallet now has 6 million users and $30.5m (£21.7m) in investment.
The German smartphone-first mobile bank has drawn 80,00 users within its first year of launch. Number 26 is going against the grain by forming strategic partnerships with other FinTechs, much to its success.
Property Partner is a platform that allows users to invest in individual properties across Europe, with as much or as little money as they want. As of March 2016, the business had crowdfunded over 170 properties, with more than £25m invested in just over 12 months.
Revolut’s vision is to make travel money a thing of the past. The company’s card can be used anywhere in the world where Mastercard is accepted. The accompanying app boasts a range of useful features, including an option to block the Revolut card directly from the app in case of theft.
Death of the high street branch?
The Accenture Banking Customer Survey 2015 found that an average customer interacts with their main bank about 17 times a month. 15 of those interactions are non-human, such as via social media or using a mobile banking app.
In the face of these numbers, the report states that banks will "follow consumer behaviour and close branches as they see their consumers shift away from branches to digital".
Nordic banks have already closed down around 50% of their branches since 2008 in order to improve cost efficiency drive by digitisation.
If current trends continue, Europe and the US may not be far behind this same strategy.