Banks are facing rising competition from tech giants such as Alibaba Group Holding Ltd (NYSE: BABA) spurred by the growth of its financial services. Banks are being advised to be more like tech companies to level out the playing field. This means banks have to mimic technology the way these tech giants do and become more like a startup in their work culture.
Embracing technology alone is not enough, especially since these days, tech giants are giving their customers so much more. Another important factor in growth lies in restructuring the fundamental technology.
Like startups, banks have got to be on their feet, nimble and willing to take the risks in the path.
If a bank can achieve these aspects, then there is no reason why they cannot grow quickly as is the case of tech firms.
Despite the odds, banks still have a good amount of factors working in their favor. When it comes to liquidity risks, market risks, and credit risks, banks are familiar with excellent risk management practices which means that banks are not that far behind in catching up with the rest of the world.
How should banks compete against tech firms?
The CEO of DBS, Southeast Asia's largest lender, is of the opinion that all banks need to do is embrace technology and adopt a better work culture to race ahead. He stated that banks are up for the challenge and somewhat equipped because of their management skills.
Analysts are of the opinion that banks may never become as agile as a startup or fintech but all things considered, there is a need for banks to become better than they currently are.
Banks have a larger client base and for the most part, there is a large amount of interaction involved with the clients. Banks have to be highly innovative and develop their own high-performance technology.
Seemingly, fintech companies seem to be giving banks a run for their money. But a deeper inspection reveals that while fintech companies possess an edge, they are not enterprise-ready. This means that the talent in a bank, due to experience, is far better than the talent in a fintech.
The current obstacle is the heavy regulation imposed on banks. Even so, experts and CEOs of major banking institutions are of the opinion that regulations are good. They help banks get more innovative and find ways to work around these regulations.
The first and foremost approach to better growth is to effectively manage data in order to monetize whatever data is available with them.