Startups have been less disruptive in the financial services ecosystem than expected, a new report released today finds.
But the World Economic Forum paper also said that financial institutions’ interest in becoming more “experience-driven” is opening the door for competition from global tech giants which they currently rely on – such as Amazon, Google and Facebook –to enhance their own offerings.
“The partnership between banks and large tech companies risks not staying a reciprocal one,” said Jesse McWaters, lead author of the study. “Financial institutions increasingly rely on technology firms for their most strategically sensitive capabilities, but can so far only offer their ongoing business in return.”
The report looks at areas such as cloud computing, customer-facing artificial intelligence (AI) and big data customer analytics. These areas are becoming critical to financial services firms, but tech giants have “far deeper experience than their financial services counterparts”.
For instance, the likes of Aon, Capital One, Carlyle and Nasdaq currently rely on Amazon Web Services; Capital One and Liberty Mutual use the Alexa voice-activated personal assistant; and Brazil’s Banco Bradesco allows customers to use its services on Facebook.
The report warns that while these partnerships can accelerate innovation, they also “pose a risk, should large technology players choose to enter financial services in direct competition with retail banks and insurers”.
“Tech giants would be able to pick and choose their points of entry into financial services; maximizing their strengths like rich datasets and strong brands, while taking advantage of incumbent institutions’ dependence on them,” said McWaters.