Tech firms 'will be biggest banking disruptors'
Written by Anthony Strzalek
Global technology giants like Amazon, Facebook and Google are causing more disruption than FinTechs to traditional banking and insurance, a new World Economic Forum has found.
According to the report, the challenge to banks and insurers is down to large technology firms hollowing out the value proposition of these institutions by carrying out more core functions, even as banks and insurers lean ever more heavily on them to compete.
Another finding of the report, which aims to examine the impact of innovation on the financial ecosystem, is that FinTech startups, while achieving success in terms of changing the basis for competition, have had less impact than expected in disrupting the competitive landscape.
The report draws on interviews and workshops with hundreds of financial and technology experts. It highlights cloud computing, customer-facing artificial intelligence and Big Data customer analytics as three capabilities that are becoming critical to the competitive differentiation of financial institutions.
The report states that all three are domains where technology giants like Amazon, Google and Facebook have far deeper experience than their financial services counterparts and where scale effects will make it difficult for financial institutions to catch up. As a result, many banks and insurers are turning to technology firms to provide these core functions.
Jesse McWaters, lead author of the study at the World Economic Forum, said: “The partnership between banks and large tech companies risks not staying a reciprocal one.
“Financial institutions increasingly rely on technology firms for their most strategically sensitive capabilities, but can so far only offer their ongoing business in return.”