Fintech Advancements in this Era of Digital Disruption

April 18, 2016 - 4 Comments

Citigroup has just released a report projecting European and American banks are going to cut over 1.7 million jobs in the next 10 years. The reason… fintech advancements. This estimate represents close to 30% of current staff levels and is in addition to the 750K jobs that have already been shed since the financial crisis.

This report speculates that retail banking will be the most affected in Europe, which is contrary to the past few years where most cuts have been in the investment management side of the industry. Technologies focused on relationship management are key to this prediction putting intense pressure on the traditional branch model.


On demand access, mobile technology, video banking and others are poised to revolutionize the retail banking industry by taking the branch model and moving it to wherever the customer happens to be, any time, any where.

Competitive advantage is clearly linked to technology infrastructures in this era of digital disruption. New entrants offering on demand access and ‘frictionless’ alternatives are devoid of traditional channels and benefiting from surprising market share gains. Large operations can’t afford to follow, they must lead and digitize in order to capitalize on a US$1.3 trillion value at stake for the financial services industry.

We are undoubtedly on the cusp of a major digital disruption. We have seen relatively little technological innovation in lending at traditional banks even though we have seen massive investment in the area by Fintech disrupters. We’ve also seen China move 96% of eCommerce sales completed without a bank. The Citi report also highlights that in China, the peer-to-peer lending volume has reached beyond $66 billion. In the UK, that number is $5.4 billion and in USA it is $16.6 billion. The opportunities are obvious and technology will lead the evolution.

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  1. Citi’s analysis of the readiness scores yielded four distinct clusters measuring
    stages of readiness based on aforementioned pillars and indicators. The four stages
    are: incipient, emerging, in-transition and materially ready.
     Incipient: Countries in this stage are characterized by a lack of affordable (and
    basic) infrastructure and expensive / limited financial services. Countries in this
    stage include Vietnam, Greece, Kenya, Mexico and so on.
     Emerging: There is basic regulation and infrastructure exists in these countries,
    but they often have a large informal economy underpinned and perpetuated by
    people’s love of cash.
     In-Transition: Digital money is starting to make its presence felt in these
    countries, often in the form of government disbursements. But In-Transition
    countries still require significant investment in e-commerce initiatives, or the
    relaxation of regulations to encourage private enterprise.
     Materially Ready: People in this group of countries are familiar with digital
    solutions, and live in a regulatory environment that encourages digital innovation.
    Citi Money Index not only ranks the countries in its financial readiness, it also
    identifies the bottlenecks that affect each countries readiness score, with a view to
    provide a roadmap to becoming digitally ready over time. Figure 153 shows how
    each country could move from one stage to the next.

    • Extremely useful feedback, many thanks – these stage definitions are new to me and actually make a lot of sense. Much appreciated

  2. From the Citi report: “The authors believe an omni-channel strategy is the winning solution for incumbent banks over the next decade. This should be built around a competitive digital offering, a reduced and modernized branch network, and lastly, a targeted channel strategy for different segments of customers.” I’ll reiterate what I suggested last June: Cisco is in a unique position to help banks revitalize their omni-channel strategies using with its collaboration, analytics and automation software portfolio. Consider the technical, organizational and security challenges of insourcing the services provided by a Fintech to a bank’s existing application portfolio. On one hand, the Fintechs typically lack the scale and supporting services e.g. Call Center, security, multi-channel support, analytics, etc.. The banks want to play in the Fintech space by sourcing functions, partnering or using different funding models, but want to keep them at arms length of their existing systems. An opportunity for a better alternative is for Cisco to act as an intermediary, providing the omni-channel and secure integration capabilities – what I’m calling the “picks and axes strategy the Fintech gold rush” – bringing banks and Fintech companies together.

    • A really valid point and one where I have had similar thoughts. Certainly we have already had some experience in more generic start-up areas but having a specific focus on the FS industry is hugely compelling, I agree. I’m very keen to get the message out that Cisco should, as a minimum, be seen as an enabler for most things in this sector – but with the ability to actually build core capability into omni-channel, automation, cloud hosting and analytics, whilst simultaneously leveraging existing platform investment, is a powerful argument. Thanks for your input, much appreciated.