And we all know what happened to the newspaper industry, and continues to happen. Many incumbent papers have struggled to keep their heads above water. The New York Times narrowly avoided financial disaster with a cash injection from Carlos Slim, the multibillionaire Mexican businessman. The UK’s Independent went online only as their print business was incurring a massive loss. There are many more examples. Every paper now is struggling to meet their running costs, turning to paywalls, advertising and even donations.
The incumbent newspapers stubbornly refused to acknowledge the battle coming their way when the internet – technological innovation – threw up challenges that it couldn’t quite figure out, bringing their rusty old knives to a gun fight. Many barely got out alive.
OK, so there is a big difference with banks. Banks have money. A lot of money, and they have their customers’ belief that they are trustworthy deposit holders (mostly anyway). These are of course powerful trump cards to have, but, they are all they have, and they have A LOT going against them. FinTechs absolutely will work out how to gain customer trust on a mass scale and they will start biting into the bank’s market share – a market which the incumbent banks certainly still see as “their” market. Not anymore, banks.
PSD2 – the “Aaaagghhh!” moment for banks?
Now PSD2 is just a matter of months away – January 2018 is when it all kicks into gear (who knew finance would produce a popcorn moment?) – and are banks ready? No. Some are getting there, but these are the exception to the rule. Most bankers can’t stomach the reality of PSD2 that is staring them in the face yet, and won’t until they absolutely have to, kicking and screaming against the incoming tide of change.
By then, FinTechs will have taken a considerable bite out of their market share. Dozens of new banks will spring up around Europe, and where will they get their customers from? From the incumbent banks, just like new digital media like HuffPost, like Mashable, like social media, like corporate blogs helped cut newspaper print circulation in half in the last ten years.
And PSD2 gives FinTechs something that alternative media never got from the main newspapers – direct access to the dominant market players’ customer data. Imagine if alternative media groups could have accessed incumbent newspaper data on their readers when they began to spring up. It would have been a huge advantage, and they didn’t even need it to create havoc for the older newspapers.
But, ominously for banks, PSD2 presents FinTechs with this very powerful capability. This should worry banks to their very core.
Will banks ever learn?
Maybe, but for most, it will come after a painful adaptation period that will see them lose market share, revenue and arguably most importantly of all, the message with their customers.
And some others? well, they won’t make it – they’ll get squeezed out by FinTech, by a new banking sector that will be populated by dozens or even hundreds of new banks (thousands?). The belligerent, cantankerous bank that is averse to change will also have to deal with the tech giants like Google and Apple, muscling in on “their” territory.
It is also important to note that there are a select few big banks that are fully aware of the need to innovate and innovate now – they have accepted that they are entering a dog fight but the challenge is of course if they can translate the will to evolve into effective action. To compound incumbent bank misery, these open-to-change banks will probably steal a march on their more change-averse peers.
The winner of all this will of course be the customer – you, me and Bill next door even though Bill probably has no idea yet – the financial sector will soon be replete with scores of companies vying for your attention, and gone are the days where the only differentiation between what banks offer you are which shade of grey the interior of their branches are.
Timothy Woods is a freelance finance copywriter. For content writing enquiries please reach him at firstname.lastname@example.org or visit woodscopywriting.com.