Digital transformation to make heritage financial firms ‘irrelevant’ by 2030, says Gartner
The growth of digitisation will mean 80% of heritage financial services firms will either go out of business, become commoditised or exist but not compete effectively by 2030, according to a new report from Gartner.
As global digital platforms, fintech companies and other non-traditional players gain greater market share, these traditional firms will struggle for relevance, the company added.
David Furlonger, vice president and analyst at Gartner, highlighted that banks are facing a growing risk failure if they continue to function 20th century business and operating models.
The 2018 CEO survey by Gartner revealed that there is a clear shift towards emphasising efficiency and productivity improvements and the importance of growth levers, indicating digital business is mainly a channel and transaction automation play, focused on business optimisation.
Additionally, upcoming technologies offer transformational opportunities by creating trust between unknown parties.
Gartner suggests three types of traditional firms will flourish of the total 20%. These are:
- Power-law firms: Companies that own a digital platform will use its scale, low-cost infrastructure and the customer information it generates to create new services and enter new markets
- Fintechs: These are individual companies or pure-play/neobank subsidiaries that will disaggregate traditional financial services in discrete product areas
- Long-tail firms: The lower costs enabled by digital platforms will let some traditional providers to act as service brokers. This is possible for large populations of poor and working-class people globally that were not profitable customers previously
The speed of digital transformation in financial services partly depends on regulation, along with customer demographics and behaviours, which varies from nation to another.
Earlier this month, Gartner argued in another note that CIOs need to be aware of emerging technological trends like quantum computing, real-time language translation, and nanotechnology. Quantum computing is the biggest bet that CIOs need to be aware of, the company added.
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