Finance Firms Say New Tech Is Their Biggest Threat
Digital payments and peer-to-peer lending technologies threaten to destabilize major financial players. To compete with rising tech firms, finance firms will have to learn to be flexible and agile.
Even financial titans are vulnerable to the rapid disruption tearing through practically every market. According to a new survey from the Economist, shifting regulatory environments are no longer the top concern among bankers, replaced by fintech as the greatest threat to their long-term survival.
While fintech services are becoming a financial market mandate, they put a severe strain on the IT infrastructures of large, traditional organizations. These institutions are already under pressure to meet consumers’ rising expectations, shorten product development times, and quickly react to changing technologies. Now, that pressure will be compounded by the non-industry tech companies who have already made such features core selling points. To cope with these market changes, they’ll need to rethink how they manage their IT capacity.
According to Citigroup research, by 2017, the market share of digital disruption will increase to 5% of total revenues; by 2020, it will double. Finance organizations are nearing a tipping point where they will risk losing considerable profits if they don’t directly compete with technology startups unveiling groundbreaking fintech services. In fact, they may have to reduce staffing levels by 40-50% due to the need for automated process and cost-cutting.
Indeed, according to the Economist survey, 64% of bankers expect retail banking to be fully automated by 2020, and 57% project that greater amounts of money will flow through fintech services like digital payments and peer-to-peer lending (P2P) than traditional ones.
20% of respondents indicated that non-financial tech companies may also emerge as a threat. As Computer Weekly observes, companies like Facebook and Amazon may lack the physical branches and highly-specialized knowledge that banks offer, but they already have the massive IT infrastructures needed to support high volumes of fintech transactions.
And as it turns out, it’s precisely the size and strength of their on-premise offerings that is slowing banks down. Not only are bank branches and associated staff expensive — 65% of the retail cost of large banks, according to Citigroup — but the colossal legacy IT infrastructures needed to support them have trouble rapidly scaling to meet rising capacity needs.
With hundreds or thousands of physical servers spread across a bank’s infrastructure, it’s incredibly difficult to know how to best optimize your existing capacity, much less how to upgrade to more efficient machines in cost-effective fashion. To maintain new fintech resources successfully and compete with agile tech players, it takes comprehensive capacity management.
But by monitoring and managing resource usage across the whole of IT, finance companies can identify specific areas where they can save costs or allocate more power to a high-use application. Moreover, a dashboard is the most effective way turn punishingly complex IT information into simple and actionable insights. Using products like TeamQuest’s Vityl Dashboard, finance executives can easily oversee the integration and scaling of fintech applications, while IT managers can use powerful algorithms to optimize systems on a granular level.
Put another way, to outcompete with data-driven fintech startups, finance firms will to turn their systems data into a competitive advantage. When the future of the financial industry is unclear, the only solution is to sharpen your image.