The impending global crisis will make half of all banks in the world inviable.
According to McKinsey analysts, banks are already struggling because for many return on equity is simply behind their expenses. When the crisis comes, conventional banking institutions will be outstripped by FinTech companies and technological corporations. The latter are already busy poaching customers from ordinary banks.
McKinsey believes a solution for conventional banks would be new business models – otherwise the banks just risk becoming “footnotes on the margins of history.” Among other, the experts suggest that banks spend more on innovations. It is estimated that currently these expenses account for about one-third of the banks’ IT budgets. For comparison, FinTech startups spend twice as much on innovations.
Invest Foresight interviewed banking technology expert Karl Summanen who said that neobanks in Russia are already forcing out conventional market players. However, he believes that neobanks will never be able to take over the market completely.
Saxo Bank co-founder and CEO Kim Fournais partly agrees with the analysts. He says that in order to become competitive in the rapidly changing world, banks should re-think their IT strategies so that they could stand up to technological giants.