The Future of Banking: Adapting to Fintech Disruption and Securing Customer Data in the Digital Era
Payments made with technology produce a wealth of customer data that can be examined and used to produce insightful analyses and business analytics. Delivering the smart services and user experience that customers are coming to demand depends on these insights.
It’s evident that banks need to use new tactics to compete with digital first and UX driven payment platforms, since data indicates that they may be losing as much as 25% of their clientele to subpar customer experiences3. With differing degrees of success, this is already in progress.
The evolving financial landscape The fintech industry, which now makes up 2% of the $12.5 trillion in worldwide financial services revenue, is expected to more than triple to 7% by 2030, according to estimates by Boston Consulting Group4.
The pandemic, which forced the closure of businesses worldwide and cleared the way for digital first providers, accelerated this tendency. In fact, according to a recent Mastercard survey, 82 percent of SMBs have modified how they make and receive payments since 2020, with half of them adopting a digital service5. Acquiring a share of this market is crucial for securing future growth, as the global payments industry is projected to reach a valuation of $20 trillion by 2026. It is not surprising that our research indicates some level of worry on the part of the banking sector given the increasing competition from payment providers.
This is particularly evident when it comes to the rivalry for small and medium-sized enterprise (SME) clients.
Small and medium-sized businesses (SMBs) generate around 54% of sales revenue in the US7. Given this substantial income and data, the banks cannot afford to overlook this segment of the market.
The good thing about banks is that they understand the difficulty. A common question across many industries, including banking, is how to react to tech-driven disruption and competitors who are going digital first. Card payments are the backbone of the economy, with $9.5 trillion in transactions made in the US each year1. Despite significant technological disruption, they continue to present the largest opportunity for new service development, value creation, and cutting-edge user experiences.
Banks have lost market share during the past 10 years due to fast changing consumer expectations and technological advancements, especially with regard to digital payment providers. Global payment provider sales increased by 11% in 2021, surpassing the growth of the banking industry, driven by fast-growing companies like Square and Stripe, according to McKinsey2. Banks run the danger of losing data, one of the most precious commodities of the twenty-first century, if they lose consumers to payment providers.
In the payments industry, the Economist’s adage “data is the new oil” has never been more accurate than it is right now.
Payments made with technology produce a wealth of customer data that can be examined and used to produce insightful analyses and business analytics. Delivering the smart services and user experience that customers are coming to demand depends on these insights. It’s evident that banks need to use new tactics to compete with digital first and UX driven payment platforms, since data indicates that they may be losing as much as 25% of their clientele to subpar customer experiences. With differing degrees of success, this is already in progress.
