At a time when most of us are well adept at checking our cash balance on a mobile banking, and well used to receiving push notifications on our smartphones every time someone deposits money in our PayPal account, it’s more than tempting to assume that this partnership between finance and technology is a relatively new concept.
This is perhaps especially true for those of us old enough to still remember paper-based cheque books and standing in long-queues in our branch in order to make a deposit, both things which seem practically archaic in today’s fast-paced, digital society.
The truth however, is that banks have been capitalising on innovations in technology as far back as the mid-1800s, when transatlantic cables were first used to slash the processing time of stock transactions between Britain and the States from over a month and a half to within the space of an average working day.
A firm financial-technology partnership
At the time, this was nothing short of groundbreaking, and only served to cement a firm finance-technology partnership which has since seen the banking sector become among the first to consistently adapt itself to every major technological advancement in over a century, from the earliest IT networks right up to the invention of Internet -and later mobile- banking.
Yet having evolved hand in hand with tech for so long, banks have finally found themselves languishing behind -the accelerated growth of the tech industry, coupled with a need to comply with complex regulations such as the impending SA-CCR, putting financial service providers in a less than enviable position.
Having led the way for so long, banks now face the real possibility of the tech industry leaving them in the dust, with customers attracted to new financial service and products offered by industry heavyweights like Google, Apple, Amazon, and even Facebook.
A helping hand
It’s not quite game over for finance just yet however. A wealth of both small startups and long-tenured fintech companies have reached out to the industry, offering a helping hand in the form of new products and services designed to satisfy the demands of both customers and regulations such as SA-CCR.
The ons now then, is on the banks themselves to reach out in response and accept that helping hand, though this means doing much more than simply continuing to invest in modern technology. If the finance sector is to remain relevant at a time when mobile phone manufacturers are leading the charge in consumer transactions, the industry needs to think carefully about how it’s actually using that tech investment.
In other words, there needs to be a larger shift in the banking industry’s mindset, one that moves away from outdated systems, complex regulations and the imminent challenges posed by regulations such as BCBS 352, the latest -and to date final- regulation imposed by the Basel Committee’s FRTB (Fundamental Review of the Trading Book).Instead, the industry should now be looking to adopt an approach which focusses on digital transformation and innovation, with partnership working and better use of the mass of data service providers have at their disposal.
Making up for lost ground
With effective business intelligence and analysis, everyone from insurers and lenders to banks and financial security firms can begin to develop new systems, new platforms, and new consumer-end applications. By doing so, institutions will be better placed to not only make up for the ground they’ve lost over recent years, but also finally meet the demands of those customers who, in increasing numbers, have been turning to mobile phone manufacturers and iPod designers to enjoy the kind of services which were traditionally the reserve of banks and banks alone.
It’s a challenge, certainly, especially with increasingly more sophisticated cybersecurity threats forcing just as complex regulations, but by actively working alongside those responsible for laying down these banking regulations and these new fintech companies, the banking industry can perhaps once again enjoy the kind of fruitful finance-technology partnership it first established well over 150 years ago.
Photographs by Tinkoff Bank
