Fintech making inroads but US bank revenue little changed

NEW YORK: Financial technology startups and other new entrants are making inroads in the US banking market, but have yet to capture a threatening share of bank revenues, according to research published by Accenture Plc yesterday.

Around 19% of financial institutions in the US are new entrants, such as challenger banks, non-bank payments institutions and big tech companies, according to the report.

Yet they have amassed only 3.5% of the total US$1.04 trillion in banking and payment revenues so far, Accenture found.

In the UK, new entrants have made a larger dent, having captured 14% of the total £206bil (US$238.45bil) in industry revenues, with the majority going to non-bank payments companies, according to the report.

Accenture assessed more than 20,000 banking and payments institutions across seven markets around the world to determine the level of change that digital technologies have brought about in banking.

Since the financial downturn, a growing number of companies across the world have sought to position themselves as cheaper and more user-friendly alternatives to banks by making better use of new technology.

Banking and payments institutions have decreased by nearly 20% from 2005 to 2017. Still, one in six current institutions is what Accenture considers a new entrant, or companies that have entered the market since 2005.

Their impact has varied by geography.

Tougher regulations and greater dominance of large banks have made the US a more difficult market for new entrants in areas excluding payments, Alan McIntyre, head of Accenture’s global banking practice, said in an interview.

“You still have a very robust banking market in the US,” McIntyre said.

More than half of new current accounts opened in the United States have been captured by three large banks, which have had more money to invest in digital than smaller regional players, he added.

In the UK the situation has been different, thanks in part to a push from regulators aimed at fostering greater competition in the financial sector and diminishing the dominance of large banks.