By Michael Taggart
Which one of the following three statements is false?
1. Patrick, the oldest known bare-nosed wombat to have walked the Earth, died a virgin at 32 years of age last spring;
2. Our chances of being killed by a vending machine are actually twice as large as our chances of being bitten by a shark;
3. Around three quarters of senior bankers believe that digitisation will affect their business model.
That’s right, it’s the last one. It's not only false but, astonishingly, the exact opposite is the actual truth – some 76% of senior bankers believe their model will remain unaffected by fintech.
Yeah, right. And I’m Patricia, the straight-laced lady wombat who wouldn't make Patrick happy.
That astonishing stat was just one of maybe a dozen that surprised a rapt audience of students, bankers and entrepreneurs at this week’s Fintech Visionaries lecture at Queen Mary University in East London.
We were in the hands of a passionate and engaging Jeff Tijssen, head of fintech at technology consultancy Capco, who adroitly crafted a picture of an unstoppable revolution in the way we are using financial products and services.
Far from failing to affect the business model of banks, this earthquake began rumbling a long time ago. As Tijssen reminded us, it’s already two and a half years since JPMorgan Chase CEO Jamie Dimon warned in his annual letter to shareholders "Silicon Valley is coming”.
Dimon meant startups were coming for Wall Street, innovating in areas like lending and payments that were key to ‘traditional’ institutions like JPMorgan.
As it goes, JPM decided to embrace those precocious businesses by working out how to collaborate with them. As a result, it has become significantly focused on fintech, investing in dozens of companies, including Motif, Square and Prosper.
In fact, despite the apparent so-laid-back-we’re-horizontal attitude of senior bankers, the big banks now want to become tech companies themselves, Tijssen told us.
Hardly surprising when you consider that the world’s five biggest companies – in order from largest, Apple, Alphabet, Microsoft, Amazon, and Facebook – are all tech companies.
So they have so-called ‘accelerators’ in which they incubate fintech start-ups. For example, Barclays has Techstars near Old Street's 'Silicon Roundabout' and even the Bank of England is getting in on the game.
But the tendency has been to keep the bespectacled hipsters with perfectly manicured beards – this is, so far, a male-dominated movement – at arms length, tucked away among the converted warehouses of Shoreditch.
And therein lies the problem, Tijssen told us. The big banks are often playing at fintech without fully integrating the innovation it brings into their operations.
This might be born of complacency, we learned via some more stunning statistics courtesy of our host.
Only 3% of us switched our bank accounts in the last year. Conversely, a significant 37% have been with their bank 20 years or more.
The ‘Big Four – RBS, HSBC, Lloyds and Barclays – run 77% of UK personal accounts and 85% of the business banking market. This represents a big challenge to the main ‘challengers’ – Monzo, Atom, Tandem, Tide, Civilised, and Starling Bank.
So what’s next? Well, as ever, the Millennials are the ones to watch and – guess what – they’re scaring the bejesus out of the grey-haired board-level defenders of the status quo.
A whopping 73% of Millennials want digital-only relationships with their banks, according to a recent Gallup poll, and 69% say they would try a financial offering from a non-financial brand, like Facebook or WhatsApp (Millenial Disruption Index).
So, what’s the best way for the traditional financial institutions to face this challenge? Tijssen had thoughts:
“Don’t think innovation is building proof of concepts or innovation labs or cool offices with slides and pool tables. The challenge is: how will you integrate fintech into your business?"
All in all, a fascinating and eye-opening talk, whether you were a banker, a fintech CEO or a student eyeing up a career. This free event was one of a series given by Queen Mary Business and Enterprise Society – I’d highly recommend checking out future events.
Foco specialises in fintech PR and marketing - please email Michael Taggart for more information.