Peer-to-peer lending. Robot financial advisers. Crowd funding. Alternative currencies. Every day seems to bring news of another whizzy new financial technology start-up.
The industry is exploding, and may be reaching a tipping point where it starts to seriously damage the major banks – a report this week from Capgemini found that 63pc of customers had used a “fintech” product and were more likely to recommend them to friends than any traditional provider.
Perhaps slightly late in the day, the major banks have woken up to that threat, and have started to respond with a hurricane of investments, either trying to create their own platforms, or else partner with one of the fast-growing new challengers. The strategy is fairly clear – if you can’t beat them, join them.
There is a problem, however: it is not going work. The existing players are too big, too burdened down by costs, have operated in an over-regulated market for too long, and are unlikely to pick the winners anyway. In reality, the major banks are in more trouble than either they or their investors yet realise.