Bitcoin and blockchain are likely to dominate discussions at Davos this month. But there will be a far deeper deliberation about the wider disruptive impact of technology on banks.
Financiers used to think that the post-crisis regulatory burden would make financial services less appealing for new entrants. But now they fear that non-banking rivals may target more profitable areas and skim the cream in areas such as payments or lending. Central banks are concerned too. The Bank of England recently war-gamed the impact of fintech on banks’ business models for the first time in their stress tests, suggesting UK banks could lose £1bn of profits to new competitors.
The picture is changing fast, with US deregulation and the finalisation of the Basel rules. Banks have had to focus on repair and new rules since the crisis, soaking up their change-the-business technology budgets. Now, they can potentially free up resources to focus on maximising the potential of technology
A more intense focus by banks on potential disruption has four big implications.