Bank to the Future

“We need banking, we don’t need banks”.

The rise of payment providers and now eventech companies providing banking services has, in the first decades of thetwenty first century, given credence to the above quote from Bill Gates.

Global payment provider revenues, spearheaded by high-growth businesses such as Stripe and Square grew 11 percent in 2021, outpacing growth in the banking sector. And, with the fintech sector, which currently accounts for 2 percent of the $12.5 trillion in global financial services revenue, expected to triple to 7 percent by 2030, this trend shows no sign of slowing.

Pollinate Global’s latest banking report, based on conversations with 200 banking executives from across the US, gives us a snapshot of how the banking sector is responding to this challenge and the counter-strategies being considered.

The report reveals how competition is especially fierce in the small and medium sized business (SMB) market. SMBs account for 44% of US GDP, close to half of all employment and 54% of US sales revenue. Not only this, but alongside being the growing businesses of today, SMBs are also the scale-ups, unicorns and household brands of tomorrow.

It’s unsurprising therefore to see significant growth in the budget that banks are allocating to competing for and retaining SMB customers. 39% of those we surveyed have a budget of between $1 and $10million allocated for SMB customers, up from 27% last year. Meanwhile, the proportion of those reporting an SMB budget of less than $1 million has decreased from 32% to just 4%. 46% expect this budget to increase in the next financial year too.

Showing the pace of change in the banking industry, the report reveals that while 55% of banking executives surveyed still fear losing market share to rival banks, this has declined from 60% this time last year. Meanwhile 62% fear losing market share to tech giants, and 59%to payments providers.

So, how is the banking sector responding to this challenge? 

The report here reveals a degree of uncertainty, as banks consider different options. Should they try and build the tech to compete with the tech giants? Or work with third parties to retrofit the tech onto their existing systems? There are no easy answers but banks are adapting to changing customer demand. Banks are increasingly offering business management tools for example. 47% of respondents report offering website builders and 40% are offering marketing platforms.  

These are just some of the options and strategies being considered by banking executives facing the challenge posed by digital first competition. And, while a range of opinion comes through in Pollinate’s latest report, we also see the beginnings of a strategy that might save the banking sector and give it back the central place it used to occupy in the business ecosystem. Download the report today to see where the fight for the future of banking might lead us.