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Under fire from fintech: 1 in 10 European banks to vanish by 2023

Are bank branch closures just the start?

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Photo by Tim Mossholder from Pexels

Bumper banking profits disguise an underlying weakness in traditional banks, as their per customer income has tumbled over the past decade.

That’s the finding of a report by consultants A.T. Kearney, which found data across 92 European banks revealed income per client had fallen 11% since 2008.

That issue is only being exacerbated by the growth of digital banks and fintech, with Kearney finding 15m Europeans are now customers of a digital bank, a figure they predict will grow to 85m by 2023.

“Not all banks will survive the tide of change as customers increasingly favour digital banks and innovative products and services,” said Simon Kent, A.T. Kearney’s global head of financial services.

Bank branch closures are another warning sign, with a quarter (24.6%) closing in Europe since 2008.

Kent calls it “a short-term fix to steady the books, but it is not enough—traditional institutions need to consider strategic transformation to improve cost and top line and also offer more innovative products and services.”

Open banking is poised to be the next big driver of change, according to Kearney, with their research finding 50% of customers are open to sharing more personal data with their banks.

The impact

While A.T. Kearney’s timings seem a little aggressive, the changing landscape of modern banking is unmistakable.

Monzo just revealed it’s reached 2m customers in an unbelievably short space of time, while Revolut’s claim of over 4m customers is equally impressive.

But Kearney’s findings discount the changes already happening in traditional banking—as they would for a consultancy looking to drum up business.

With a ‘build’ strategy banks like Barclays and NatWest have been racing to add more innovative features into their apps, while RBS is gearing up to launch its own ‘flanker bank’ called Bo.

On the ‘buy’ strategy, BBVA has poured cash into Simple in the US, Atom Bank in the UK and Holvi in Finland, while RBS (via Bo) has already taken a 25% stake in Loot.

While fintechs and digital consultants downplay traditional banks’ ability to innovate, they also overstate consumers’ willingness to change.

Our recently published AltFi/Streetbees Digital Banking Benchmark 2019 found that actually 95% of Europeans are happy with their existing bank.

Certainly, the landscape will change over the next five years as digital banks mature and traditional banks react, but I’m more cautious about whether 10% of European banks will really vanish by 2023.

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