The call for retail banks to reinvent their business models has never been more urgent. On one hand, banks are challenged by shrinking revenues and struggle with achieving operational cost efficiencies. On the other, they must face the rising threat of FinTech startups that are attacking their core businesses, with the likes of Lending Club, Funding Circle, TransferWise and Venmo quickly becoming household names.
Banks have the chance to revolutionize finance just as Spotify has with music - but how can they use their Big Data advantage?
Are you in love with “Discover Weekly” too? Fellow Spotify users know what I’m talking about: the newest feature is a two-hour playlist, updated automatically every Monday, and based on both my personal taste as well as the listening habits of other users with similar preferences. Spotify claims that Discover Weekly will automatically adapt as my musical tastes evolve, and the more I use their service, the more relevant my algorithm-based curation will become.
When I started working in FinTech, the first question I had was: "Do banks seriously give us all that data to analyze?" To be honest, I was mainly concerned about my own privacy instead of dreaming about the benefits I could get by giving some of my information to third parties.
The last few decades have seen the financial industry slowly incorporating Internet-based technologies to open up new distribution and operational channels. Digital banking allows customers to access almost all financial services from anywhere, at any time.
Banks, however, are still offering essentially the same products and services as they did in the past. Compared to other industries such as entertainment, travel and retail, banks are not yet using these channels to actually change their business model or propose new and more relevant products or services. A few bells and whistles aside, the banking industry has yet to be truly disrupted.