There is much debate around the threats that banks are facing with the advent of fintech and the disruption this will cause to their businesses.
There is no doubt that the aftermath of the global financial crisis damaged the reputation of the banking world and led to a period of introspection, coupled with increased regulatory resilience measures. As a result, banks must hold more capital to cover the perceived risks of their activities as a requirement.
In the meantime, fintechs were able to exploit the weaknesses in the banking system with the promise that new technologies would transform the provision of banking services, whether or not the banks were ready to play.
In the last few years, banks have repositioned themselves, with some deciding to focus activity on specific countries, product areas, or the servicing of particular customer segments. Much of this has affected their provision of services to the SME market rather than the major and global corporate companies. Banks have also begun to embrace the world of fintech by adopting the new technologies, and joining transformation programmes to change some of the paper driven and commoditised services into digitised and streamlined processes.
However, there is much evidence to show that fintechs and other companies that provide complimentary services to banks, or hold and manage mass amounts of data, are nibbling around the edges of what was once the preserve of the banks. For example, foreign exchange services, payments, and cash management are becoming readily available through non-bank service providers. Open banking and the increased availability of real-time data have created further opportunities and competition, and with treasurers being more attuned to the efficiency gains that can be achieved through these new service providers, further growth is expected.
While the non-bank sector can claim to be more flexible and innovative, they do not have the history and long-standing relationships that banks and corporate companies maintain. Banks have more experience and knowledge of the treasury support required by corporates and so remain their trusted partner, despite not being able to deliver services as efficiently as some of the new players.
Banks cannot rest on their laurels. As fintechs gain more experience and traction, there are now more receptive treasurers who are open to learning about their advancements and offerings. In the meantime, banks are reacting through increased collaboration with the fintech world, and, for some banking services, maintain the risk appetite and balance sheet that cannot be matched by a fintech or non-bank player.
Therefore, it is my view that while the banks will not have a future monopoly on treasury services, they will retain a dominant position in the servicing of the major corporate sector.