Banks must operate more like technology companies in order to stay relevant for years to come, executives in the financial services industry say.
“I happen to believe that many banks, perhaps not all, are well-positioned to build brand new products,” David Rafalovsky, chief technology officer at Russian state-owned lender Sberbank, said during a panel at CNBC’s East Tech West event in Guangzhou, China on Monday.
Rafalovsky expressed frustration with the categorization of fintech, or financial technology, firms as separate to — and a threat to the existence of — the banks. “We are fintechs,” he said, adding major lenders are “no less” fintech than the technology upstarts.
A flurry of new players have entered the market looking to compete with established banks. In Europe for instance, app-based checking accounts from the likes of Monzo, Revolut and N26 have lured in millions of customers thanks to their slick user interface and absence of fees.
To add to the pressure on the banks, tech giants like Apple, Facebook and now Google have been making inroads into finance. Apple earlier this year launched a credit card, piggybacking off an account provided by Goldman Sachs, while Facebook announced its libra cryptocurrency initiative and Google is set to debut a checking account next year.
For Standard Chartered, the focus is ensuring its IT team works “like a fintech,” Michael Gorriz, the bank’s chief information officer said. “For every bank — and there’s no exception — we have to master technology just in order to increase the customer convenience.”
“We have to be quick,” he said, adding the journey from an idea to a service “must be as short as possible — we are talking weeks, not years.” Gorriz added the lender has invested in a number of fintech companies, in order to partner and utilize its technology within the bank. But, he added, “if this is not enough, we set up our own fintech companies.”
Henry Ma is chief information officer at WeBank, an online bank backed by Chinese tech giant Tencent. He pointed to the benefit technological innovation in financial services has when it comes to people who have limited access to banking — or none at all.
“Technology is actually providing a golden opportunity for us to be able to tap into a market which was highly untouched before,” he said. The World Bank says that 1.7 billion adults are “unbanked,” meaning they don’t have an account with a financial institution.
Sberbank’s Rafalovsky said that the banks which will “survive” in the long term will operate more like a Facebook or a Google and offer good products. “Their products would have to evolve,” he said. “They would have to move and operate as technology companies do.”
And WeBank’s Ma agreed. “Banks should behave more like technology companies,” he said, adding that the branchless bank has invested heavily in hiring engineers and data scientists. “Banks should invest a lot more in core technology and be competitive once again.”