At the speed with which the world is advancing, it is normal that different companies and industries are constantly making alliances or reinventing themselves to remain competitive and avoid the risk of disappearing. This behavior is also common in nature, where organisms must adapt to survive the climate, habitat, or escape their natural predators to survive.
The bank, for its part, faces (in an increasingly urgent way) a technological and cultural transformation. The industry is advancing by leaps and bounds towards a new ecosystem with the emergence of new competitors and players, mostly companies born in the network, already adapted to the demands and characteristics of their new digital customers.
“Historical” advantages that traditional banking has had
Regarding the permanence in time and advantages, some people think that banks are like countries; for example, it is common for companies or businesses to disappear after a while; however, it is rare to see a country disappear unless there is a war or a revolution. Banks tend to behave like countries (remaining in time) because they manage the local economy, have a close relationship with the authorities, have state support in the face of their own mistakes, in addition to influencing the new laws of a country or state. Although this may be a positive point for the bank, at the same time, it becomes a “point against” for the end-user since this environment of “comfort and influence” of the bank tend to hinder its development and growth. Preventing it from “innovating,” significantly reducing the quality of its products or services. If we add to this the term “captive banking markets” (people or clients who use a certain financial product or service simply because there is no other option available), we can understand why a bank is more likely to survive than a company or business from another area.
Differences with companies and businesses in other areas
Unlike banks, companies and businesses (from other sectors) are always competing for users, this means that they constantly have to innovate, creating new products and services that generate high value for end-users; this “purification process” Means that only competitive and efficient companies can remain in the market, while companies that are not competitive or efficient are simply “excluded” from the market by the same users, under the supply and demand system.
The new change
Although this outlook seems encouraging for traditional banking, the truth is that this environment of “comfort and influence” has its days numbered due to the emergence of new actors on the scene: blockchain technology, the growth of the Internet, Fintech, and the boom of the new social platforms; these 4 factors make the end-user realize that alternatives can be more decentralized, economical, flexible, and intuitive. For this reason, the status of “being permanent as a country” no longer applies to a traditional bank.
To survive and progress in this new environment, traditional banking has to take advantage of its competitive advantage, which is to “have at hand” its customers’ data, turning that data into knowledge to offer them a better experience and develop competitive financial products and services. Reinventing itself also goes through the construction of new advanced technological platforms and a profound cultural change. Only time will tell us whether the “country” status will continue to apply to traditional banking.
What do you think about this topic? Do you think traditional banking really needs a change?
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