Banks are faced with more competitive disruption from tech behemoths than financial technology (fintech) start-ups, according to a report by the World Economic Forum (WEF).
Contrary to concerns surrounding small fintech firms drawing business away from the financial services sector, the report concluded that start-ups had less of an impact than expected.
“Fintechs have changed the basis of competition in financial services, but not the competitive landscape,” Rob Galaski, co-author of the report and Canadian lead for financial services at Deloitte, said in a statement on Tuesday.
“Fintechs now define the tempo and direction of innovation in financial services, but high customer switching costs and the rapid response of incumbents has challenged their ability to scale”.
Drawing on interviews with finance and tech industry experts, the report found that banks were significantly lagging behind tech giants in the development of technologies like cloud computing, artificial intelligence and big data analytics.
Lenders have instead been turning to tech corporations to provide these functions, the report said. It singled out Amazon, Google and Facebook as three companies dominating the market in these areas of innovation.