The Battle Lines for the Consumer Have Been Drawn

Banks have always fought to gain power and market share, knowing their competition and serving a marketplace that had relatively few choices. The battlefield is changing, however, as technology advances and new players emerge. The marketplace is also restless, demanding more from legacy and emerging institutions.

In the TV series “Game of Thrones” – a sequence of events occurs around the same time to put an entire country into upheaval. The reigning King dies, a girl discovers she has three dragons at her disposal, and the monstrous White Walkers awake from their sleep. Similarly, in banking, we have had a sequence of events occur to cause significant turmoil in an entire industry.

The Digital Revolution. In 2007, Steve Jobs introduced the world to the iPhone. Wireless connectivity became fast, reliable and accessible. And the rate of adoption of smartphones that ensued to create an always-connected population took the world by surprise.

The Global Financial Crisis. The financial crisis of 2007-2008 significantly damaged the trust consumers had when it comes to the banking industry. In the 2010 book Spend Shift by John Gerzema and Michael D’Antonio, research quantified the drop in trust in Financial Services companies at 58% between 2007 and 2009.

Increased Banking Regulation. In the wake of the financial crisis, Federal Reserve powers were expanded, lending practices were more tightly regulated, capital reserve and reporting requirements increased.

All of these factors, combined with the fact that banking had been relatively undisturbed for centuries, meant it was time for change. And that change was #fintech.

Finovate started in 2007 as a showcase of innovation in financial technology. With just 20 companies exhibiting in the first year, many of them were traditional technology providers to traditional banks (Digital Insight, Metavante etc.) but there were glimmers of what was coming from companies like Mint, Lending Club and Prosper Marketplace. They were focused on disintermediating or disrupting the banking sector.

Nine years later, and fintech is one of the hottest sectors in the world. Finovate happens three times a year with 70+ vendors per event and according to research from Accenture, global fintech investment grew 75 percent in 2015, exceeding $22 Billion. The Fintech Battlegrounds have been drawn and they have fallen into 3 categories.

  1. Disruptors: Those selectively attacking the business of traditional banks
  2. Enablers: Those that help traditional banks transform in to digital businesses
  3. Collaborators: Disruptors who are partnering with traditional banks to extend their product offerings.

Let’s look at how the war for banking customers is playing out.


For many, the first real disruptor to enter the banking sector in the current era was PayPal. Initially, traditional banks treated PayPal as an annoyance, limited to eBay and with little potentially to disrupt the highly lucrative and bank dominated payments industry. In 2015, PayPal had 173 million customers, $9.2 billion in revenue and $1.2 billion in profit and was more valuable than their parent eBay.

There have been multiple disrupting entrants into the domestic and international payments businesses and it’s a dominant theme at financial innovation conferences. But, there have also been many disruptors enter other aspects of the financial services industry.

Account aggregation and disintermediation services like, peer-to-peer (P2P) lenders like Lending Club, So-Fi and Prosper all have made their mark. Wealth management alternatives like Betterment, Personal Capital and Wealthfront.

The recent, much publicized challenges of the marketplace lenders highlight just how challenging it is to ‘disrupt’ an industry as old and powerful as banking. But that doesn’t mean that disruption is dead as noted in CNBC commentary. It’s just hard work and a long road.


There are also the financial services start-ups that are working with traditional banks to help them transform their businesses. And there are two categories of fintech enablers:

1. Large, established players: Firms like FIS, Fiserv and even Oracle, CSC and IBM, who look down on the “fintech” term saying “we’ve been doing this for decades, and now all of a sudden it’s cool?” These vendors offer everything including the kitchen sink to their clients. A so called “one-stop-shop” for all the ‘tech’ a ‘fin’ may require.

But their size, once their advantage, is becoming a disadvantage as many of these companies struggle to move quickly. They’ve responded with acquisitions and innovation labs to accelerate new product offerings in mobility, wearables, big data etc. Companies that were once complacent and closed ecosystems are trying to become nimble again and have become more “open” without sacrificing their current position of strength by cannibalizing their revenue streams.

2. Smaller, newer players: Firms like Yodlee, MX, Trulioo, Socure, Mitek, iOvation and even Avoka specialize in specific areas of the banking ecosystem such as big data, fraud, KYC and customer experience. These partners enable the delivery of specific pieces of the overall digital transformation in the banking sector. But, in general they need to be able to work with or integrate with the large, established players to deliver the coveted “seamless end-to-end customer experience”.


The newest player on the banking battleground – disruptors offer their products through traditional banking organizations. We’re seeing an emerging trend of banks recognizing that some of the disruptors are capturing a market segment that banks can’t service today. And it’s a segment that may, in the future, be highly profitable.

Consider my personal situation – I relocated from Australia to the US and of course, had no US credit history. Bank credit policies are clear regarding new entrants to the country – I didn’t meet their criteria for credit. But was I a bad risk? Of course not, but as one of the largest banks in the country put it “There’s nothing I can do.”

There are lots of scenarios where a consumer may be a good future prospect for the bank, but rigid credit criteria means the bank can’t help them today. But by partnering with a disruptor, the bank can be seen to be helping the customer – albeit on a collaborator’s terms.

As a result, we see partnerships like:

Maybe we are moving to a phase that Ron Shevlin refers to as “The Platformification of Banking,” where traditional banking organizations become the distributors of financial services from a host of financial services organizations. Hopefully (for the bank’s sake) these so called ‘partnerships’ will give the bank access to the customer in the future when they want to offer traditional banking products.

Hopefully the customer becomes a lead the bank can target in the future.

Building Alliances for the Future

Back to where we started with Game of Thrones. As the characters often state “winter is coming,” or in our case, “disruption is coming” or “change is coming”. One avenue for banks to respond to this change is to partner – but choosing your partner(s) is incredibly important, especially for smaller banks that simply don’t have the money to establish their own innovation labs like the big boys.

But where should the partnering be focused? As one large bank CEO said in a meeting, “We’re looking to innovate at the fringes, where our bank touches the customer.”

That is the key to growth and retention of customers. KeyBank is a leader in digital customer experience – and, in 2015, they achieved 4X retail customer growth compared to the rest of the market. KeyBank offers more products through the digital and mobile channels than most other banks. They’ve made themselves easy to do business with … and customers rewarded them with their business.

Customers need banking products – how easy you make it for them to get your products will determine whether you win or lose on the financial services battleground. And just like the houses of Stark, Lannister, Targaryen – the way to win is to team up with those that complement you. Partners who focus on customer experience and make the experience frictionless or effortless for the customer are the key to unlocking growth.

So, whether you partner with disruptors or collaborators to offer products that are difficult to offer yourself (like Regions working with Avant), OR you work with enablers to give you the digital capabilities you need rather than trying to build them – partnerships are key to success.

And if those partnerships aren’t helping you to acquire and retain customers – you’re looking at the wrong types of partners.

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