By Alex Littner, Managing Director of Boost Capital

THE last person you’d expect to bash the banks is a former banker. But, that’s just what Antony Jenkins appears to do when he predicts the demise of the big banking institutions. Reinforcing his message on the Today Programme (1 November), the former group head of Barclays warned in a speech ( ) that the banks are fast approaching their ‘Uber moment’ – when digital innovation and tech-savvy alternative finance providers will not only give the financial establishment a serious run for its money, but could even put many traditional banks out of business altogether.
It’s a bold claim, and perhaps not so surprising when one considers that Jenkins has moved into the fintech sector himself since being ousted from his top position at the bank last year. But, while I wouldn’t entirely agree with likening the banks to dinosaurs lumbering towards extinction, he does raise an interesting point. Fintech has already irrevocably changed the face of financial services, and it has done so in a remarkably short period of time. And those banks that fail to take heed - and, indeed, work with their smaller, technology-driven peers to give customers the products and service they will increasingly demand - could risk being left behind.
Clearly, Boost Capital is part of the altfi world that is said to be threatening the banking establishment, and I do believe what we and our peers offer is improving the customer experience, and giving them a faster, more efficient service. And such innovation in business finance is proving very disruptive to the status quo. One could argue the banks have sat on their laurels for too long, serving shareholders rather than customers, even taking those customers for granted. The speed with which altfi has risen in recent years has shocked many of the banking giants out of this complacency, and increasingly they are at great pains to demonstrate the ways in which they’re embracing the digital revolution. However, some of their efforts appear token, and lag far behind the real change being brought about by fintech pioneers.
Such large institutions will always struggle to move at the speed of their smaller rivals, and have to wrestle with legacy systems that can be hard to adapt. But others are voluntarily innovating and evolving, working with new funders to change the way customers are served. And it is in this collaboration that I think some of the greatest opportunities for the banks – and the fintech entrepreneurs who work with them – lie. RBS has been referring its SME customers declined for bank borrowing to peer-to-peer lenders since early last year, well before the recently launched bank referral scheme required them to do so. Santander is another finance behemoth that has embraced technology, partnering with online lenders to speed up lending processes for SMEs. Rather than fighting the tide, they are trying to ride the wave of change that’s occurring.
That the new and old guards should work together makes perfect sense in many respects. Much fintech activity still operates on the underlying banking system. Also, the banks are big, established brands that still carry a degree of trust among consumers – even if that trust has been somewhat dented since the financial crisis of 2008. New funders undeniably benefit from association with these household names, since many business owners still seek reassurance that relatively untested newcomers to the finance field are reliable and credible.
A fundamental shift that fintech is bringing about is putting the focus back on the customer – and that can only be a good thing. While altfi is using technology to make finding finance quicker and easier, most providers are still keenly aware of the need to keep the individual business at the heart of the process, understanding its specific needs, and providing it with a more personalised solution. This is something our business has explored in some depth ( ), how to automate processes to meet the desire for speed and efficiency, while still maintaining an appropriate level of human intervention. The funders that thrive in the future – whether banks or non-traditional lenders - will be those asking themselves these difficult questions now.
Jenkins highlighted the number of business sectors that have been dramatically altered by the use of technology – publishing, telecoms, music, retail, and transport, to name just a few. Financial services will be another, and it must adapt in order to survive in anything like its current form. Even then, customers will increasingly dictate what funders must provide, just as they have done in other areas of the economy. The winners in future will be those who listen to the SME audience, and give it what it needs in as fast, convenient, and cost-effective a way as possible. Banks will be around for some years to come, I predict, but I also expect them to look quite different from what they do today. And their current position of dominance is far from assured.

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