Technology giants may pose greater long-term threat to banks than fintech, Markides says

Limassol, Cyprus. Technology giants such as Apple, Amazon and Google may pose a greater long-term threat to traditional banks than fintech companies, London Business School professor Costas Markides said. He warned that control of the customer relationship is becoming the key battleground in financial services.

A hybrid banking model

In an interview with Forbes Cyprus ahead of the first Forbes Next Gen Banking & Fintech Summit, to be held at the Four Seasons in Limassol on October 13, Markides said fintech companies have fundamentally changed banking but are unlikely to displace traditional banks altogether.

He expects the sector to move towards a hybrid model combining competition and cooperation between established lenders and fintech firms.

Markides said that “fintech companies have been particularly successful in separating individual services from the traditional banking package and offering them more quickly, cheaply or conveniently.”

These services include payments, foreign exchange, buy now pay later services and self-directed investments.

The challenge of becoming a primary provider

Although fintech providers have attracted millions of customers, particularly younger ones, Markides said many still retain a traditional bank as their primary financial provider.

The next challenge for fintech firms, he said, is whether they can move from being a useful secondary account to becoming customers’ main financial relationship.

He expects only a limited number of well-funded fintech companies, such as Revolut or Monzo, to develop into full-scale banks capable of becoming customers’ primary financial provider.

Most are more likely to remain specialist providers, cooperate with banks, be acquired or struggle to secure the deposits, capital, trust and scale needed to operate as full-service banks.

Traditional banks retain advantages

Traditional banks continue to hold major advantages through their balance sheets, deposits, risk-management capabilities, regulatory experience and customer trust, Markides said.