A decade from now, the face of banking may no longer be recognizable. According to the McKinsey Global Institute, a Hi-Tech disruption is already underway in retail banking. Banks have accepted the real possibility that 60% of profit and 40% of revenue could disappear by 2025.
Transforming the financial services industry are Hi-Tech startups in areas such as online loans, mobile payments and robo advisory. And as ex-CEOs from banks and VCs invest in FinTech, much more is at stake for the banks in losing their “customer relationships”, the vital source of their cross-selling activities and banking margins.
What does this mean for leaders in banking and other financial services? Technology disrupts industries exactly when incumbent leaders get too comfortable, according to Clayton Christensen, author of The Innovator’s Dilemma and Professor at Harvard Business School. In 2014, even in a low interest rate environment, banks made record profits of $1 trillion – sound too comfortable?
With profits rising, products and processes became entrenched, other than for fine-tuning. There was no compulsion to change anything. The real challenge for banking leaders: can they let go of what worked yesterday and innovate for the future? Even with banker hopes for higher rates, those that don’t adapt to FinTech will be left behind.
Like New York and London, Hong Kong has been a major financial centre. Although it is located in the heart of a rapidly-growing region, it has already fallen behind Singapore and Sydney in creating a FinTech ecosystem. Change begins with leadership adaptability.
If your organization wants to adapt to change, Contact EQ How.