fintech disruption

Beyond retail banking and payments lies investment and commercial banking, the next frontier for fintechs looking to disrupt the status quo.

The Banker’s Top 1000 World Banks ranking reflects the ebbs and flows of our world. When I first looked that the list in the 1980s, it was Japanese banks that dominated what was then the top 500 ranking. Twenty years later, it was the US banks. Today, it’s the Chinese banks. Looking ahead 20 years, who will be in the lead?

World trade is not static, obviously. It moves with the times, expanding and contracting like a living organism. Change is constant. The big question for a global bank is how to be relevant in the time we have reached now. Or, more importantly, how can it be relevant in the time we move to next?

“What’s next?” is the question I ask myself every day, and it was easy to answer before the pandemic. Today, I have no idea what’s coming next.

Clearly, there are a lot of change taking place. Specifically, innovators like Nubank, Stripe, Revolut and Alipay are making a big impact on the banking industry. Yet, most of those examples are affecting retail banking and payments. Where’s the big impact on commercial banking and investments?

The next big thing

If I’m honest, I have two bits of advice for fintech start-ups: fix the things banks do badly; and focus on thing that banks don’t do.

Fintechs are pretty good on both, but I don’t see enough of them focusing upon the harder parts of banking. Retail banking is easy, while investment banking is hard. Retail banking is easy because we all do it; investment banking is hard because it requires expertise.

Most fintech innovation is focused on payments and lending, rather than trading and investing

That’s the reason why most fintech innovation is focused on payments and lending, rather than trading and investing. However, there are a few innovators in the investment banking arena who are interesting – mainly in the artificial intelligence and blockchain space.

Rather than being specific, it’s just a recollection. My main remembrance goes back to the 1990s when neural networking was rising, followed by program trading, and then algorithmic and flash trading. It’s all about speed and networking.

When we talk about investment banking, we look for speed. Do the deal 0.0000001 seconds before the other guy and you got the deal. Speed is where fintech should focus on in investment banking.

The second area is recording and reporting. Once the deal is done, the process of recording and reporting the deal is onerous. Transactions need to be on a ledger and now that ledger is distributed. The major change we are seeing currently is that companies are focused on the speed of trading and networking the record through the blockchain.

The next level of disruption

There are hundreds of companies developing innovative solutions in this space, often led by people who used to work for banks. Importantly, those who worked for a bank are able to truly understand this space.

Investment and commercial banking is often a challenging arena for outsiders. But, in 2021, there are many people leaving banks to create start-ups that rethink this space with technology; in particular with technology that focuses on the speed of transactions and recording of transactions. In other words, the connectivity of the network enabled by blockchain.

I could identify more than 100 companies in this space, but I don’t want to name names. What’s important overall is that fintech is not a retail banking or personal finance space: it’s a space that is reinventing everything. Have you noticed?

Chris Skinner is an independent financial commentator and chairman of the London-based Financial Services Club.

PLEASE ENTER YOUR DETAILS TO WATCH THIS VIDEO

All fields are mandatory

The Banker is a service from the Financial Times. The Financial Times Ltd takes your privacy seriously.

Choose how you want us to contact you.

Invites and Offers from The Banker

Receive exclusive personalised event invitations, carefully curated offers and promotions from The Banker



For more information about how we use your data, please refer to our privacy and cookie policies.

Terms and conditions

Join our community

The Banker on Twitter