The digital age has brought choice – unprecedented choice – to our fingertips. At the click of a button we can find recommendations from peers on which car to buy; with one swipe we can compare the best deals on exotic getaways. Choice is no longer a luxury, but an expectation. A wave of innovation in the financial services sector in recent years is now bringing this same level of choice to a sector that was long dominated by a handful of traditional bank incumbents, writes Richard Wagner
The recently introduced UK account switching regulation went some way to scratching the itch. However, like many other initiatives to stir up competition in the industry, this is largely inviting customers to compare apples with apples – banks with banks.
We hear of ‘challenger banks’, and while this is an interesting development in the industry, I think the real excitement lies in the emergence of specialist players. That is, companies offering bank alternatives for niche services such as FX, invoice finance, business banking or lending services. The ability to cherry pick services from a range of providers is an appealing prospect for SMEs and consumers alike, and as awareness of all the possible options increases, I see no reason that this trend won’t continue to gather pace in line with demands for affordability, transparency and flexibility.
We have seen aggregation and comparison sites take off in the retail, travel, insurance and job search sectors, and more recently in financial services for niche areas – for example, currencytranfer.com, which brings together the best offers for international business payments.
The recent launch of Business Banking Insights, a joint initiative by the Federation of Small Businesses (FSB) and the British Chambers of Commerce (BCC) takes this comparison one step further. This platform is designed to help SMEs compare providers across a range of financial services including business bank account, foreign currency services, invoice finance, payment & transaction services, to find the one that is right for them, depending on their size. I would love to see this go further, to include a greater range of alternative financial services providers.
As the financial services sector continues to evolve, there are rumblings around the future relationship between traditional banks and fintech. Should they partner up, with banking giants ‘leaning into’ innovation? Or buy up? And will the challengers be bought?
One of the most interesting ‘near moves’ we’ve seen of late was the proposal of legislation that would force banks to refer SMEs to alternative finance providers once they have declined them for credit. To me, this would be a great step forward, and a taste of the future. As consumers and SMEs get a taste for the range of services on offer, with ever easier comparison mechanisms available, it seems right that we are moving away a ‘one size fits all’ approach – one customer with one bank for all services.
In the future, we may well see traditional banks function as umbrella service providers, embracing the innovation and flexibility that the alternative finance community brings with it. "Pick ‘n’ Mix banking", if you will.
Rich Wagner is CEO of Advanced Payment Solutions