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FinTechs and tech giants eye most profitable segments of banks

8th December 2017

Despite having weathered numerous crises over their long history, conventional banks have seen their market share eaten into by new, technologically-savvy competitors in recent years. A new report highlights that banks risk losing out to rapidly proliferating FinTech competition.

The banking system has seen good health return, as the effects of the 2008 financial crisis gradually recede. Many now have robust capital buffers, while cost cutting measures have taken effect. The financial crisis resulted in considerable write-downs for banks, while government monetary policy has since placed considerable strain on net interest margins. While non-performing loans have been, or are being dealt with, increased global fortunes have resulted in most banks being able to improve their revenues.

However, a new McKinsey & Company report, titled ‘Remaking the bank for an ecosystem world’, has shown that the rise of FinTechs may come to cloud the sector’s growing fortunes.

Global revenue growth stood at 5.7% per annum between 2010 and 2015, driven largely by banks in emerging economies – Chinese banks saw 16% CAGR in revenues for the period, while Emerging Asia came in at 10.2% CAGR. In Europe and North America, growth has been more subdued – at 1.9% and 2% respectively, while the UK has managed above average 2.5% growth for the period.

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