The Covid-19 pandemic has provided a major boost for ‘new-age players’ to seize market share from incumbent US banks, according to research by Capgemini.
According to the group’s Retail Banking Top Trends 2021 research, as bank profits dropped as a result of the COVID-19 pandemic, competition from innovative new competitors grew to squeeze margins – and have continued to attract more customers.
The research found that 36% of customers discovered a new financial provider during the crisis and planned to continue with them post-pandemic. In addition, 55% of fintech customers said they were satisfied with their provider’s offerings.
Fintechs have seen a rapid uptake in the last year as consumers adjusted to the reality of lockdown by embracing new digital experiences.
Such rapid growth of the market was attributed to increasing internet penetration coupled with proliferation of smartphones and the continuous increase in digitalization initiatives among financial organizations.
Financial technology has been a major digital transformation force, challenging traditional US retail banking structures and improving efficiency across the financial services value chain.
The first wave of fintechs unbundled traditional banking services by providing stand-alone, domain-related offerings in payments, lending, accounts and more, the Capgemini report detailed.
Now they are rebundling services by expanding from mono-line offerings such as bill payments to a diversified suite of banking products.
According to a separate World Retail Banking Report 2021, sponsored by Capgemini and Efma, “42% of bank executives polled said that they were not sure how to integrate and streamline mid-, back- and front-office functions effectively, and 46% said they are unsure how to embrace open banking, orchestrate the ecosystem or become a truly data-driven organization.”
Despite this research, US banks are fighting back and are adding a range of new services to existing offerings.
Google teamed with Citibank to introduce bank accounts in 2020, echoing Apple's move in 2019 of launching a credit card partnership with Goldman Sachs.
By summer 2020, eight US banks joined the partnership to offer co-branded accounts via Google Pay according to the report.
JP Morgan CEO Jamie Dimon has previously expressed concern about the increasing competition posed by fintechs claiming they are using regulatory loopholes to give them a commercial edge.
Tagged under The Economy, Technology, Financial Trends, Retail Banking, Tech Management, Mobile, Online, Cards, Feature, Lines of Business, Feature3, Covid19, Consumer Credit, Customers, People, Fintech,