News EU watchdog says some banks too plodding to win...

EU watchdog says some banks too plodding to win fintech race

-

- Advertisment -

LONDON (Reuters) – Banks saddled with bad loans risk being left behind by nimbler upstarts and Big Tech in the rapidly evolving fintech race, the European Union’s banking watchdog said on Tuesday.

EU watchdog says some banks too plodding to win fintech race
FILE PHOTO: A European Union flags flutters outside the EU Commission headquarters in Brussels, Belgium June 20, 2018. REUTERS/Yves Herman

The European Banking Authority (EBA) looked at the risks and opportunities from fintech and its impact on the business models of long established lenders. Fintech refers to using smartphone technology like apps for financial transactions and payments.

Risks to banking profitability depend on how well banks adapt to what customers want, and whether they are weighed down by books of souring loans or hindered by old technology, the EBA said in a report on its findings.

“This is particularly challenging for some large complex incumbents that have a very formal and slow governance structure, further restricted by legacy ICT systems or legacy non-performing assets,” it said.

It divided unnamed banks into three baskets: proactive front-runners with aggressive strategies; reactive “followers” who take a “wait and see” approach; and passive “reluctant to change” lenders left behind, many focusing on whittling down stockpiles of bad loans.

London has long been the main fintech center in Europe but Britain’s departure from the EU next March has spurred Berlin, Paris, Luxembourg and other centers to offer sweeteners to British fintech firms to relocate.

While the EBA is developing its knowledge of fintech, there is no rush in the EU to slap heavy new rules on a sector that promises growth and jobs – and is still tiny compared with the main banking system.

Meanwhile, banks worry that deep-pocketed tech giants like Google, Facebook or Amazon will use their huge retail footprints to scoop up millions of new financial services customers.

“Incumbent institutions consider that BigTech firms have the potential to become significant competitors in the provision of financial services, as is evident from their increasing footprint in the financial sector,” the report added.

But at this stage, fintech firms do not seem to be in direct competition with established banks, despite the fact that some fintechs are reaching maturity in terms of scale of operation and profitability, the EBA said.

“Nevertheless, the competition among incumbents appears to be growing as a result of the fast-paced technological development and many institutions competing to achieve the first-mover advantage.

“At this point, the predominant type of relationship between incumbent institutions and fintech is partnership and collaboration with fintech firms,” said the report.

The benefits to banks of investing in fintech have yet to translate into lower costs and higher revenues as they “struggle to quantify and trace the outcomes of innovative solutions”, it said. “This could indicate that the effects of fintech on incumbent credit institutions are not material at this stage.”

Reporting by Huw Jones; Editing by Mark Heinrich

Source link

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Latest news

Bitfinex Is Paying hackers to recover stolen Bitcoin from 2016 hack.

How can you trace $1.3 billion dollars from a Bitcoin heist? The Bitfinex cryptocurrency exchange offers the...

How to Make Margin Trading More Profitable Than Spot Trading

In the financial sector, there are different ways of trading assets and commodities, Both spot trading and...

The 3 Main Reasons Behind Bitcoin’s Rise

Bitcoin is famous for its volatility, but has been unusually calm in recent months. The digital currency...

US Banks Can Now Open Bitcoin Accounts? Is This a Good Thing?

Do you remember what was said by the banks against cryptocurrencies? That it's nothing worth talking about...
- Advertisement -EU watchdog says some banks too plodding to win fintech race

PlutusDeFi’s Plans To Let Decentralized Finance Fans Lend And Earn On Idle Assets

German-based non-profit dGen speculated the industry could surpass the trillion-dollar mark in the next decade. They wrote...

Cryptocurrency Has Brought A New Wave of Transaction

The most beautiful definition of a cryptocurrency suggests that it is a digital currency, which is crafted utilizing the...

Must read

How to Make Margin Trading More Profitable Than Spot Trading

In the financial sector, there are different...
- Advertisement -

You might also likeRELATED
Recommended to you