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Fintech is a danger for everyday banking

The ‘fintech’ grows so fast that the future of traditional banking is increasingly threatened. In the Spanish financial sector, nobody denies that the challenge is to put the sixth speed in the process of digitization, but everything points to it will not be a path of roses. Many entities have a problem of size and profitability that will prevent them from facing the biggest sectoral revolution in many decades.

Just a few days ago, the ‘fintech’ FinReach started operating in Spain with a disturbing message for the national bank: 30% of Spaniards would change banks if the process were simpler. It says who has an ‘online’ platform precisely to facilitate customers transfer of accounts between entities in -sure- “issue of minutes.” It is just an example to show how the offensive against old models comes from all fronts.

The big groups, that is to say Santander, BBVA and CaixaBank, will say in the imminent presentation of the results of the financial year 2018 that have placed digitization at the center of their strategies. They will not be the only ones, but not all entities can get cruise speed in this process. The governor of the Bank of Spain, Pablo Hernández de Cos, warned him a few weeks ago that he believes that the low profitability of the business prevents the entities from facing the challenge with the necessary volume of investments.

Meanwhile, in Davos, Oliver Wyman has put on the table a report that ensures that only entities capable of generating digital business in parallel to the traditional business models of the sector will survive. Which is the same as saying that banks have to create their own ‘fintech’. The consultant says that the cost of starting this process is affordable and provides some information: they can be created in a year with an investment between 9 and 53 million euros.

But in the sector they are not so clear: “It is not just a matter of launching new vehicles, but to pay for the deactivation of some of the existing ones so that the accounts can be squared. The problem with banking is that it has very expensive traditional structures in terms of structure costs. To face the change, we have to face enormous expenses. There are many banks that with the rates at 0% and the margins suffering greatly can not afford it, “they say in a medium bank.

In a year marked by the agglomeration of bad news in the sector at the beginning of 2019 – the intervention of Banca Carige, the warnings of the CNMV to another Italian bank such as Monte dei Paschi, the ‘profit warning’ of Société Générale or the collapse of the English Metro Bank-, it is becoming clear that the bank has a long crossing of the desert. Many entities can only overcome the challenges imposed by the new global scenario through mergers to gain size and avoid being left out of the process.

“In Spain we are seeing the negotiations between Liberbank and Unicaja to give rise to a bank with a market share of 4%, but it is only to see how the German Government is promoting the integration of the national giants Deutsche Bank and Commerzbank. There are many who doubt that a merger will solve everything, but even more are those who agree that separately they have little to do with the problems that each one carries, “say sources in the financial sector.

Therefore, a large part of banking faces the digital challenge in a position of weakness and many accumulated problems. Digitization is not an option, but a necessity, but the process threatens to leave victims along the way.


Also published on Medium.

Published inFintech

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