Moreover, new technology holds great potential to transform how consumers and clients initiate and process transactions. It’s no longer just a case of new currencies or faster payment methods, but an entire rethinking of how transfers of any value might be undertaken, according to the Innovation in Payments: the future is fintech report issued by The Bank of New York Mellon (BNY Mellon). With nearly 4000 active fintech startups in the arena and investment in the sector tripling in 2014 to USD 12 billion, a challenge to bank dominance is emerging not just in retail but also wholesale and corporate payments.
Although the financial services industry already has one of the highest ratios of IT spend as a proportion of revenue, over three quarters of this is estimated to be in maintenance rather than new services. Banks need to redress this imbalance, says the report, if they are to thrive in the new fintech era. They must also compete with smaller rivals by implementing swifter technology development cycles and replacing legacy payments systems.
Ultimately, though, the best way to harness the revolution being unleashed by technology such as the blockchain is to work with fintech firms, through partnerships, capital investment and accelerator programmes. Ian Stewart, CEO, treasury services business, BNY Mellon, says the banking industry is traditionally conservative about change and, therefore, lack of action towards innovation can prove costly. Banks should position themselves at the centre of the payments industry by understanding, interacting with, and take advantage of the array of fintech developments.
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