Banking / Finance

Is banking losing the battle for consumers?

Despite a significant financial recovery from the global banking crisis, the banking industry faces decreasing margins and increasing competitive threats as fintech start-ups are positioned to steal lucrative retail and business customers, according to a report by McKinsey & Company. The report,The Fight for the Customer: McKinsey Global Banking Annual Review 2015, states that, “As digitization accelerates, banks will be in a battle for the customer that will define the industry for the next 10 years.”
McKinsey expects stable returns, with margins declining as interest rates remain low, competition intensifies and new fintech firms start to undermine banking’s economics. The ongoing digital revolution and growing regulation will have a significant impact on banking economics and business models. According to McKinsey, “Driven by technology, non-banks, fintech firms, other more established tech companies and shadow banks are disrupting banks’ relationships with their customers and posing a significant threat to revenues.”
The Battle for the Digital Consumer
The digital revolution is impacting all industries, including banking. It is impacting the way consumers access their products, how products and services are delivered and purchased, and the underpinnings of the entire financial marketplace.
McKinsey research has found that consumers are willing to try fully digital product propositions for deposit and credit cards, with more than half saying they would switch banks if a fully digital provider made an attractive offer. While actual switching may not reach that level (due to massive friction and consumer lethargy), the interest is definitely there for ‘digital natives’.

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