For all the talk of the disruptive capacity of Fintech start ups, it is the tech giants like Google and Apple that banks fear the most says a new global study by EFMA and funded by Infosys Finacle.

EFMA is a global not-for-profit organisation bringing together more than 3,300 retail financial services companies from over 130 countries. This study extended into about 70 countries.

The study, called Retail Banking, Industry Disruption says “Google has been active in financial services for some time with Google Wallet, but has had relatively little success so far. A more significant development recently has been Apple Pay, but banks and card companies are actually working with Apple to make this service more useful for their customers. There are no signs yet of these companies trying to launch banks and attack the core markets of the established players.”

Three quarters of those surveyed consider the threat from disruption to be high or very high, a significant turn around from the complacency that was evident in other studies even as recently as a year ago.

According to author Michael Pearson, “The highest perceived threat is from tech companies like Google and Apple, seen as high or very high by 45 per cent of banks. The next highest perceived threat is from start-ups, rated high or very high by 41 percent of banks.”

Despite the growing evidence that boundaries between industries are becoming more porous the study found that there was little concern from the banks about the threat from telcos, retailers and insurers.

Be afraid

Fear is a great motivator and the study found big increases in investments in innovation with the vast majority of retail banks increasing their spend in this area over the last 12 months. Much of that money appears to be going into channel development.

On the fintech front Pearson notes, “We have highlighted the innovation from start-ups in retail banking in our previous innovation studies, and the investment in FinTech as a whole has taken off dramatically in the last couple of years. Some successful challengers have achieved very high valuations which encourages more investment. Not all of these companies are competing with banks and many are potential suppliers or partners.”

He says some of the new technologies which have emerged in recent years are starting to have a dramatic impact on the banking industrywith mobility at the top of the list. “This is followed by advanced analytics/big data (57 per cent), open API’s (53 per cent ) and the internet of things (47 per cent).”

Peer-to-Peer (P2P) lending has emerged as the most disruptove business model and is  “already affecting product areas like personal and small business lending, and money transfers.”

From a niche and quirky idea just a few years ago, now 40 per cent of bankers believe that P2P will have a high or very high impact on the industry.

Among the potential impact from the startups Pearson notes the following;

• Among the disruptive technologies the proportion of banks expecting start-ups to have a high or very high impact is 65 per cent for mobility, 57 per cent for open APIs, and 48 per cent for advanced analytics/big data.
• In the area of advanced analytics the proportion of banks expecting start-ups to have a high or very high impact is 58 per cent for customer intelligence, 58 per cent for social intelligence, and 56 per cent for realtime analytics.
•  In products and services, banks expect that start-ups will have the most impact on payments (where they could be competitors, partners or suppliers) and on digital marketing (where they are most likely to be suppliers). In payments the impact of start-ups is predicted to be highest in P2P payments.