A February 2016 McKinsey analysis on FinTech cuts to the quick to separate noise from game-changing dynamics. Banks still matter but nothing will ever be the same again.
According to the analysis, the FinTech revolution is in six theatres - (a) customer acquisition (b) service cost reduction (c) innovative use of data (d) great segment adaptability including millennials, small businesses and the under-banked (e) leverage of banking infrastructure (f) working with regulatory stakeholders. Ability to capitalize on dynamics in these theaters is likely to determine whether a FinTech business model would succeed.
As for banks, the analysis comes up with a recipe of six digital imperatives - (a) data-driven digital insights (b) integrated customer experience (c) digital marketing (d) digitally-enabled operations (e) next-generation technology (f) digital enablers including talent, organization and culture.
So Fintech may eat some of the banks' breakfast, particularly those slow to change. But it also offers opportunities for the more visionary banks to partner or leverage it.
Many are still waking up to an era of rapid change. Digitization is only one of its many dimensions. But this is one that is set to completely revolutionize the banking business as we know it.
For Challenges and Opportunities of Small-and-medium-sized Banks, see my earlier PowerPoint presentation (in Chinese).