Banking Sector Approaching The Tipping Point, Says New Citi Survey
In this guest post, Andrew Birmingham, editor of business site www.which-50.com, takes a look at recent data that says FinTech is about to serve the global banking system one large serve of disruption pie…
Digital disruption is pushing the global banking sector to a tipping point, according to a major study by financial sector giant Citi.
In the report, from Citi’s Global Perspectives and Solutions Group, the authors say developments in FinTech are driving the change — and they note the accelerated investment in digital-based services.
According to the study, “FinTech investments have grown exponentially in recent years: $19 billion of investment in 2015 was up two-thirds from $12 billion in 2014 and from low single-digit billions of dollars per year earlier in the decade. Given the recent shakeout in public equity markets, especially for marketplace lenders but also financial and technology companies in general, we may have a spill-over chill in private markets in 2016.”
These insurgents are pursuing the long-established pattern of disruptors in other markets: find highly profitable services in highly regulated markets where legacy applications and the casual laziness of incumbency have opened a very attractive gap in the market, and then drive a truck through.
The payments space, for instance, is intensely contested according to the study, while peer-to-peer lending is catching on rapidly in markets like China. “Peer-to-peer (P2P) cumulative lending volumes [in China] today amount to about three per cent of system retail loans — but if we were to extrapolate the recent growth rate through the end of 2018, the Chinese P2P market would be about nine per cent of total retail loans.”
Across the globe, the analysts at Citi Research believe that personal and small and medium enterprise (SME) banking accounts for about half of the banking industry’s profit pool and — just as importantly — a higher proportion of the sector’s equity value. “Sifting through over a hundred FinTech private investments, we calculate that over 70 per cent of the FinTech investments to date have been in the Personal/SME business segments,” they write.
Perhaps one of the more interesting characteristics of the shift towards FinTech lead disruption in global banking is that western markets have until recently largely been immune. The action has been more in the developing economies, where consumers were often poorly serviced, and many not at all. For the “unbanked” in these markets, smart mobility has been a boon.
However, for banks in Western markets such as North America and Europe (and presumably Australia), the heat is likely to start rising uncomfortably quickly.
The authors point out that so far only a tiny fraction of current consumer markets in the developed world have been disrupted — but they say this is likely to rise.
The team under Greg Baxter, Citi’s Global Head of Digital Strategy, estimates that currently only about one per cent of North American consumer banking revenue has migrated to new digital business models (either at new entrants or incumbents) but that this will increase to about ten per cent by 2020 and 17 per cent by 2023.
They note, “We are in the early stages of the US and European consumer banking disruption cycle, therefore we note that this estimate is subject to considerable forecast risk. However, an open question remains as to whether incumbent banks in the US and Europe can embrace innovation, not just talk about Blockchain and hack-a-thons, before FinTech competitors gain scale and distribution.”
They contrast this relative lethargy with the situation in China which, they argue, is already well beyond the tipping point. “China’s e-commerce ecosystem is now larger than any other country in the world in terms of transaction volume. China’s top FinTech companies (such as Alipay or Tencent) often have as many, if not more, clients than the top banks. China’s top FinTech players (such as Ant Financial or Lufax) often have well-resourced parent companies in e-commerce or finance that can sustain larger and more balancesheet-intensive businesses than Western venture capital-funded rivals.”
The report identfies four reasons for the accelerated progress in China:
• high national Internet and mobile penetration;
• a large e-commerce system with domestic Internet companies focused on payments;
• relatively unsophisticated incumbent consumer banking; and
• accommodative regulations.
“While the US and Europe also share high mobile Internet savvy, their local Internet leaders have not as yet strategically focused on payments/finance and their local consumer banks are more sophisticated.”
According to the Citi study, the reality of a large unbanked population, along with relatively weak consumer banks and high mobile phone penetration, makes emerging markets ripe for FinTech disruptions. “Kenya has led the way for almost a decade now with M-PESA launching in Kenya in 2007 with currently 23 million active customers in 11 countries. In next door Somalia — associated in the past few decades with political instability instead of financial innovation — mobile money is having an arguably even more profound impact with about 40 per cent of adults using mobile money.
“Similarly, in the giant Asian countries such as India, Indonesia and the Philippines with an almost 400 million unbanked population, mobile money can also help solve a societal problem.”
And regulators in these markets are also playing a part, says the report. “Policymakers look favorably at FinTech as part of the solution to financial inclusion.”
Latest News
TV Ratings 29/4/24: Farmer Wants A Wife And Lego Masters Lock Horns In Overnight’s Battle
Who won the battle of the big guns - Lego or Farmer Wants A Wife? One thing's for sure, it wasn't Great Train Journeys.
Nielsen Data Reveals Brands Spending Big To Attract Aussie Tourists
Nielsen Ad Intel data has revealed that the travel and tourism industry spent more than $153 million on advertising in Australia in Q1, 2024 – an increase of 8 per cent from the previous quarter, with TripADeal the biggest spender, followed by Virgin Australia, then the Flight Centre-owned Ignite Travel. As many Australians return from […]
IAS Awarded New Responsible AI Certification From Trustarc
Integral Ad Science tossing up over the mahogany or teak frame after being awarded TRUSTe Responsible AI Certification.
AWARD Calls For Hall Of Fame Nominations
B&T's noms for AWARD Hall of Famer includes Louis The Fly, Chums' talking Scottie dog & Mumbrella's coke dealer.
Havas Red Wins PagerDuty PR Account
Havas Red wins PagerDuty's PR. And judging by B&T having to Google PagerDuty, it could probably do with some help.
ACA Poised To Release Results Of 2023 Create Space Census
The Advertising Council unveils date for its census results. Hey, why not coincide it with an office lamington drive?
Why Fear Is Essential To Fernando Machado’s Creativity
If there's anyone B&T loves to chat to, it's fabled marketer Fernando Machado. Although the 5am time difference sucks.
Superdry Drafts AFL’s Patrick Lipinski For New Campaign
B&T fast regretting that poncho we just bought, as it appears the puffer jacket returns as winter's hottest trend.
Elon Musk vs eSafety: Legal Experts Warn That ‘Rogue Operators’ Like X Are Unlikely To Win Federal Court Battle
If this legal stoush boils down to who can afford the better lawyers, B&T's backing Mr Musk every single time.
Amy Poehler Presents First Look At Inside Out 2 At Vivid Sydney 2024
Vivid isn't about freezing your arse off while looking at lights on a wall, as you'll learn with this Amy Poehler news.
Mutinex Launches DataOS Improving Data Warehousing & Quality For MMM Marketers
Work in marketing? Does your data warehousing resemble a teenager's bedroom? Here's a Marie Kondo-approved read.
IMAA Celebrates Three Years Of Group Trade Credit Insurance Deal
Are you a struggling indie? Thinking of firebombing the building for the insurance money? IMAA has you covered here.
Adam Sandler Seemingly ‘Slams’ Ukraine In Pro-Kremlin Campaign
Host of A-list celebs caught slamming Ukraine's president. Thankfully it does have the Milli Vanillis about it.
New Marketing & Comms Agency For Defence & Aerospace Industry Takes Flight
As painful as this is to say, judging by current world events, the bomb & tank industries must be in rude health.
Opinion: Do Punters Want To Wear Your Brand?
This columnist asks do punters want to wear your brand? B&T'd say yes if you were Nike, no if you were Anusol.
WiredCo Builds Portfolio With Appointment To G.J. Gardner Creative Account
WiredCo 'cements' its relationship with home builder G.J. Gardner. Did you see what B&T cheekily did there?
Keep Left Reveals ‘Strategically Assembled’ Strategy Team
PR agency announces serious upgrade to its strategy offerings. Thankfully stops short of calling them Delta Force.
Initiative’s Michael Chong: What Do Mountaineering, Media & Marketing Have In Common?
Yes, B&T's running an inspiring mountaineering story. And this from people who won't come to work if the lift's broken.
CMOs To Watch: DrinkWise’s Part Time Builder, Part Time Marketer, Nathan Kent
Despite his love of DIY, B&T can't see Drinkwise's Nathan Kent in any "you can get it" VB ads anytime soon.
Mari Kauppinen Pops Up As MD Of ITA Group ANZ
Mari Kauppinen set to bring some zing, some song and some va-va-voom to her new role at ITA Group.
“It Is Getting Better But At A Glacial Speed”: PR Guns On Shaping A More Diverse Media Industry
B&T has a love-hate relationship with PRs. Love if they take us for a boozy lunch. Hate when you send releases as PDFs.
GoTransit Media Group Unveils The Power Of Regional Transit Advertising
Need reminding lots of people live outside the Surry Hills enclave? It's the regionals &, yes, they have almond milk.
Slew Of Promotions For Special Senior Creative Leadership Team
Special announces a slew of promotions in its creative team. And, no, they didn't order Uber Eats to celebrate.
Kantar: AVOD Subscribers Double In 12 Months
Study finds Aussies happy to watch ads on their streaming services. Or, are they just putting the kettle on more often?
Val Morgan Digital Exceeds All Campaign Uplift Benchmarks Via A 12-Month Brand Metrics Study
Val Morgan announces it has exceeded all its campaign benchmarks. Still can't get under an hour for the City To Surf.
Australian Retirement Trust launches monster of a campaign, by M&C Saatchi and Bohemia
Get offered a seat on the bus today? Knees creak like an old pirate's galleon? This retirement ad may be of interest.
Print Audits To Discontinue As Audited Media Association Of Australia Pivots To Support Influencer Marketing
Is it just B&T or are audits in the media industry suddenly becoming murkier than Roxy's husband's tax returns?
News Corp Australia Launches 2024 National Education Advocacy Initiative With Expanded Program
News Corp set to shine a light on the nation's schools in new series, giving illegal bikie gangs a well-earned rest.
Decoding The Consumer Maze: Urban List Report Reveals How Modern Shoppers Spiral From Discovery To Purchase
Latest report unravels a shopper's journey from the joy of discovery through to a nasty letter from a debt collector.
Cosmo Returns To Australia!
Ever get the feeling we've weirdly warped back to 1988 at the moment? Confirm it with the relaunch of Cosmo in print.
People & Culture Consultancy Human Kind Collective Launches To Plug HR Gap For Media Agencies
Does the very mention of HR have you struggling to remember last year's Christmas party? Get the sweats with this news.
‘We Want To Be A Growth Partner, Not Just A Media Buyer Or Someone That Makes Ads’ – Bohemia Boss On Agency’s Ambition
B&T's chatting with Bohemia boss Paul ‘Hutch’ Hutchison. Although we do think 'the dagger' a far superior nickname.
Initiative’s Geoff Clarke: ‘Youth Hits Targets With Enthusiasm, Experience Hits The Targets You Can’t See’
Initiative’s CCO Geoff Clarke on the value of experience in agencies. Not to mention quoting lines from Pulp Fiction.
The Iconic Teams Up With 5 Aussie Athletes For Latest Campaign
Fashion label brings in the athletes for new campaign, many of whom appear to have prepped with re-runs of Zoolander.
Seven West Media Secures New Director Of News & Current Affairs
After a tumultuous few weeks, Seven unveils director of news & current affairs. And B&T never uses tumultuous lightly.
Seven Network Expands NSW Sales Team With Two New Group Business Directors
Seven ramps up its NSW sales team. Both of whom are well versed in pronouncing Manu Feildel's croque-monsieur.