Transaction Trends

As fintech transforms the global financial industry, it also drives disruption across banking business segments, including payments, lending, capital markets, and wealth management, according to “Fintech—Global: Bank of the Future,” published by Moody’s Investors Service.
In fact, the report suggests that bank incumbents and new entrants alike need to keep pace with fintech if they want to appeal to customers, stay competitive amid increasing digital demands, and remain part of the financial landscape of the future.

“Successful incumbent banks will be those that, either on their own or in collaboration with others, pursue aggressive digital transformation to become more efficient and responsive to evolving customer demands,” said Fadi Abdel Massih, a Moody’s analyst and co-author of the report. “Disintermediation of the customer relationship would be a threat to this business model if it ends up reducing banks’ pricing power by transforming them into providers of a ‘back-office’ balance sheet for customer-facing apps/businesses.”

Although fintech’s effect will be far-reaching and global, Moody’s says the type and degree of change will vary depending on region and institution. In its report, Moody’s analyzes the future shape of the financial services industry across four categories: customer expectations, competitive dynamics, infrastructure, and regulation.

The report predicts that demographics and developments in other service sectors will drive consumer demand to transact electronically across an ever-growing array of online products and services. As customers migrate toward providers that can offer the best digital features, data security will become a growing competitive edge.

Meanwhile, technological advances and startups will widen the gap in competition and shift how financial services are developed, delivered, and consumed. According to Moody’s, fintechs will further advance and expand their suite of financial services from current competitive positions in payments and cash management, lending, capital markets, and wealth management.