David the fintech vs Goliath the bank

 David M. Brear photo
David M. Brear Co-Founder & CEO, 11:FS
5min read

Incumbent banks are losing. It’s no secret that challenger banks are taking advantage of the opportunities that incumbents have left on the table. But what if that could change?

Blind as a bank

Banks wear blinders, they have to. Had to. It was the only way they could focus on getting the job done and keeping the lights on. That coupled with a never-ending river of compliance measures meant that banks went from lean, mean powerhouses to bloated machinery, and that bloat never quite went away. The big banks are Goliath, run to fat.

That’s why the fintechs could act. They noticed the opportunities left on the table by incumbents as technology developed and they swooped in to take full advantage of the situation. They're Davids, who picked up a few stones that seemed insignificant to banks and are wielding them to great effect.

Now fintechs are being lauded as giant-slayers, soon to topple the incumbent banks and win customer affections for all time. The hype around challengers is reaching such a high level that issues they run into now make national news.

But it doesn’t need to be more than hype

Yes, challengers have been far more successful than any of the incumbents predicted. Unencumbered by legacy technology, they’ve pioneered features that customers have required for years that banks hadn’t delivered. But challengers are only taking what’s been left on the table.

There’s been a technological step-change that means this sort of behaviour is no longer necessary. Banks don’t need to leave anything on the table. Legacy systems are tired and old technology with constraints that challengers took advantage of. Thanks to services like 11:FS Foundry, banks can move away from legacy architecture and towards truly digital banking. Banks no longer need to play catch-up, they can be the ones leading the change.

It’s hard for a champion to stay on top when there’s no competition - there’s no motivation to stay fit.

The banking giants of the world should not be frightened of the fintech players despite all the ground they’ve gained. The big banks have all the customers, they have brands that are in place and they have experience far beyond anything that ‘David’ has in this scenario.

Fear should be saved for the real business-killers; apathy and a lack of respect for the challenge ahead. That’s what the real opponent is, that’s where the danger lies and that’s what banks have been getting wrong for a while now. Fintechs have shown the big banks that if you come to market with expertise and the right culture with a real desire and hunger to deliver what customers need, then you can achieve amazing things.

The real question is if the big banks can find the motivation to do the hard work necessary to make this sort of thing happen. If they can then they’ll win. If they can’t then they’ll lose. Big banks have all the advantages: greater capital, established brand and a high number of experienced personnel. With all those advantages, why should they lose? Loss can only happen through apathy or bad leadership.

David only beats Goliath if Goliath lets him

Back when every major bank was as slow as the next, there was no pressing need to stay lean because the level of competition wasn’t there. Now we’re seeing the pace and capability of the challengers and they’re fighting fit. It’s hard for a champion to stay on top when there’s no competition - there’s no motivation to stay fit.

With fintech challengers taking a greater slice of the market share every day there’s no room for apathy. And we’re seeing banks take big steps to get themselves back in the game. Goldman Sachs released Marcus and RBS launched Mettle. These are the organisations that are trying to rekindle the desire to deliver better customer experiences.

The people with all the money generally win everything

Change happens fast within the economics of financial services, especially when you start to lose customers. We’re seeing a steady trickle of people moving from mainstream financial services to challengers. If a challenger bank manages to obtain 3 or 4 million customers within the next few years then it won’t be classified as a challenger - it’ll be an established financial services provider.

That’s why right now is where the current incumbent banks need to step in and instead of dismissing fintechs, recognise that challengers have already made a change. Banks can’t just be fast followers, copying in-app card freezing and blowing another billion on digital transformation from the same consultancy as every other year. Doing the same thing over and over while expecting a different result is never a good look. Banks need to change up how they approach the issue and return to their position as industry leaders.

What really matters is bringing the passion. Banks have gotten lazy. Every bank knows that they’re not doing what they need to in order to save themselves, or at least a group of people in every bank knows that. They need to stop ignoring the problem of challengers, do the hard work and get back on top.

Taking the challengers seriously and understanding what makes them tick isn’t about the conflict. It’s about understanding what customers want and what fintechs deliver that makes them attractive.

Get your bank back into fighting form by heading over to 11:FS Foundry.

 David M. Brear
About the author

David M. Brear

David is the CEO of 11:FS and since his dream of being a sportsperson was crushed (along with the ligaments in his knee!) and he had to get a proper job. He has worked in pretty much every angle of the financial services industry but never lost that competitive desire to win.