The World Bank report says that you can be both big and diversified, or small and hyper-focused. However, in the future, life in the middle may not work as well.
Many large banks, technology companies, and fintech firms are growing larger and more widespread. Traditional players and banks are becoming more focused on their respective markets. The World Bank doesn’t think that it would be a successful strategy for players to try to stay in the middle of a coming “barbell” arrangement.
The financial services industry is likely to have a more balanced structure, with banks, FinTechs, big tech companies, and other providers all playing an important role. All financial players will have to adapt to this evolving market situation or face extinction. This is an important moment in the economy, where choices have to be made about how to move forward. There is a lot of speculation about the impact of rising interest rates and other economic forces on the willingness of venture capital investors to continue funding the formation of new fintech companies in the near future. There was speculation that we were in a recession, with JPMorgan Chase chairman and CEO Jamie Dimon even proclaiming that a “hurricane” was coming.
Another reason is the trend of more specialized neobanks being formed to serve specific segments of consumers or businesses, rather than general neobanks like Chime or Dave. In addition, a small but growing trend is not only to provide processing to the founders of FinTech, which uses banks as a service function but also to find and operate Neobank itself by the community banks themselves. The forecast and analysis of this trend are “Digital Transformation of Fintech and Financial Services: Impact on Market Structure and Public Policy.” This is a paper from the World Banking Group, by the organization “Fintech and the Future of Finance.” Part of a large special report issued.
