Apr 5, 2016

The Watch List | Banking, FinTech & Transformation

On this episode of The Watchlist Jim Jockle, CMO of Numerix discusses the notion of transformation. No doubt the latest buzzword - Jim provides his perspective on the latest examples of transformation he's observing in the financial services industry - specifically around the cross section of banking, FinTech and IT spend.

Weigh in and continue the conversation on Twitter @nxanalytics, LinkedIn, or in the comments section.

Video Transcript:

Hi welcome to the Watchlist, I’m your host Jim Jockle.

The concepts of disruption and transformation are words that seem to be thrown around more than ever these days.

But there’s an interesting graphic circulating around Linkedin – it shows the evolution of banking in the U.S.  In just 20 years, 37 banks have consolidated into 4 – Citi, JPM, BofA and Wells.

But what is also important to note, is that prior to 2008, over 100 new bank charters in the U.S. were issued per year.  From 2009 to 2013 only 7 new banks were formed.

In research paper from the the Federal Reserve Board – the study concluded that even without any regulatory changes following the financial crisis, the weak economy and low interest rate environment would have cause 75-80% of the current decline in new charters.  Macroeconomic factors such as low rates and a likely-transitory decline in bank demand are among the more innocuous explanations for a decline in new bank supply.

However, it’s important to ask the following is there less demand for banking services or are there other options available.  So to that end let’s take a look at the rise and impact of FinTech on the industry.

KPMG released its 2015 Pulse of Fintech report, chronicling the year’s global Fintech investment and expansion. Fintech saw nearly $14 billion in investment over 653 deals globally in 2015.  

So what is clear, is this is an industry going through ‘transformation’.
JP Morgan Chase during its firm overview – highlighted its commitment to Technology and Innovation noting that they currently employing over 18 thousand developers creating intellectual property with a $9 billion dollar tech budget – with 1/3 being spent on investments.

The technology investment JPM has articulated is quickly becoming the new normal across the industry.  As Jürgen Fitschen, co-chief executive of Deutcsche Bank said in a German publication last month “The inefficiency of our IT was the price that we had to pay to catch up with the fast-growing Wall Street banks.”  A think another question to ask, is can the banks keep up with Silicon Valley?

 

Blog Post - Jun 24, 2010

Reflecting on SIFMA: Risk and the Explosion of Market Complexity

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