The banking industry is facing an era of digital disruption and growing demand for new FinTech implementations. Investments in the financial technology sector have increased tenfold in the past five years, and changes in the way consumers and enterprises view the banking sector are becoming more apparent.
Citi recently published a report on FinTech titled “Digital Disruption,” which shows that so far, only 1.1 percent of U.S. consumers have shifted from traditional banking to new FinTech solutions. However, looking ahead, this shift will continue, and up to 17 percent of U.S. bank customers are expected to turn to new financial technology solutions by 2023. These new offerings include mobile wallets and payments, as well as automated financial advisors (or “robo-advisors”). This will undoubtedly affect bank revenues unless these institutions implement proper digital strategies.
Mobile Wallet Solutions Are Evolving
Many companies are launching mobile wallet solutions for their customers. Samsung’s solution, Samsung Pay, continues to gain momentum: five million registered users, mainly across the U.S. and South Korea, processed over $500 million in payments in the first six months. This is a clear example of how digital disruption can get a boost when technology giants venture into the world of financial solutions.
A long-standing hurdle to economic disruption has been consumers’ ingrained habit of using credit and debit cards for payments. However, some of the most successful new payment solutions are linked to credit and debit cards, including Samsung Pay. The convenience associated with this innovative solution will help merchants transition more easily to accepting mobile payments.
Automation Versus Job Creation
Automation will also play a fundamental role in turning this area of digital disruption into a mainstream trend. Automated bill payments, including those made from mobile devices, have already begun to replace the use of checks. In the banking industry, mobile devices are being used more often than ever before to check account balances or access other financial services that used to require a visit to a staffed bank branch.
According to the Citi report, we are currently “at an inflection point for retail banking driven by automation and digitalization. As banks reduce the number of branches, naturally the number of transaction-based employees such as branch tellers will decline. In the U.S., the number of bank tellers is already down 15 percent from the peak in 2007.”
There are fears that this impending shift in banking will lead to a loss of jobs, as robots and artificial intelligence (AI) solutions replace human workers in certain sectors of finance. But while the shift toward automation is inevitable, new jobs will also be created, as the banking sector needs employees who can steer this digital disruption in the right direction.
Automation will have a staggering impact on the retail banking sector, as between 60 percent and 70 percent of employees are involved in manual, process-driven jobs, according to the Citi report. Through automation, these jobs will either disappear completely or evolve into something entirely different. The financial entities that can deliver optimal transactional efficiency will gain a competitive edge, regardless of how FinTech affects the financial industry at large.
Samsung Pay offers top-notch security and works on both old and new terminals. Find out what else makes it stand out in the world of mobile payments.