• The evolution challenge facing banks
• The Impact of SME digitalisation and fintech innovation
• Achieving ‘bank as a financial OS’

The evolution challenge facing banks

Fintechs, unlike traditional banks, have gone after underserved customers like small and medium enterprises (SMEs). Think neobanks targeting local merchant stores, trade finance solutions for e-commerce sellers or lending products for software-as-a-service (SaaS) businesses. Improvement in public digital infrastructure and supportive regulations have further spurred innovation in SME-focused solutions. As a result, the landscape for SME banking has become a lot more favourable today:

a)        Digital technology has significantly reduced the cost to acquire and serve smaller customer segments, unlocking important markets for banks

b)        Digital technology and financial automation are transforming the way businesses are profiled for risk and revenue, pushing real innovation in banking products and services

However, the challenge for banks is not just one of adopting emerging technology stacks; they face disruptive competition from the unbundling of banking products. Fintechs are building value-added products on top of vanilla bank accounts, payments or cards. This is not only eating into banks’ revenue, but challenging the ‘ownership’ of customer relationships that banks have traditionally enjoyed.

The next evolution of digital banking will see banks adapt their business models to create a ‘financial operating system’ (OS) comprising core banking services, financial automation capabilities, alternative underwriting capabilities, value-added services, and collaborative marketplaces. Building such a financial OS will put banks back in control of the innovation and unbundling of their products, as well as how their traditional strengths (license, trust, infrastructure) are mo...

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