Banks are being assailed from many different directions. Challenger banks are opening millions of accounts across the globe. Big tech firms like Facebook, Amazon, Google, and Apple have shown a willingness and interest to get deeper into financial services. Marketplaces and gig economy companies provide very functional debit cards that mimic -- or eclipse -- primary banking relationships. It feels like a lonely time to be a bank.
Tearsheet turned to its audience and asked 107 financial professionals across traditional FIs to fintechs, from product to marketing to general management, about their view of the future and who they are most concerned about eating into their business.
We split our questions about future competition into 2 categories: consumer banking and commercial banking. (If you're interested in participating in future research, you can apply to join our Outlier Survey Panel by applying here)
Finance professionals are leery of Amazon eating into consumer banking today and in the future
Financial professionals seem most concerned about Amazon's tentacles moving sliding into consumer banking. Our survey panel ranked the ecommerce company highest in its competitiveness in consumer banking in the short term (1-3 years). Amazon was ranked even higher when we asked about its consumer banking threat over the medium term (3-10 years). The industry is clearly concerned about Bezos and team eating into consumer banking, regardless of whether or not Amazon launches a full-fledged banking product.
In spite of all the account openings they're touting, challenger banks from upstarts like N26 and Revolut weren't ranked higher. In terms of competitiveness, the fintech challengers were ranked as high as the in-house challengers being incubated at some of the traditional brands, like Chase's Finn.
Relatively, Facebook isn't seen as super competitive in the short or medium term. According to our panel data, Apple, Google and Transferwise pose a stronger threat to consumer banking over the medium term.
"Amazon in both consumer and commercial, challenger banks with innovative products and strategy," responded one financial professional.
Industry professionals also concerned about Amazon in business banking
Like with consumer banking, financial professionals are keeping a close eye on Amazon's intentions and activities when it comes to encroaching on commercial banking. The global ecommerce company ranked highest among our survey respondents in its competitiveness to commercial banking now and in the future, far outstripping any of the other options.
When it comes to Big Tech, respondents in general didn't rank Apple, Google, or Facebook highly when it came to their ability to disrupt business banking. Tearsheet's survey panel ranked challenger banks -- whether standalone startups or the new brands from the big banks -- as the most competitive to commercial banks after Amazon. Transferwise seems to rank in the middle of the pack when it comes the strength of its competitiveness in commercial banking in the short and medium term.
"Unless banks adopt advanced digital capabilities, [competition] will come from institutions they do not presently compete with, whether that is a large bank from out of state or a challenger bank or a true fintech offering," said one panelist. "If they do adapt (and not all will), then it only levels the playing field, no gain, no loss. I think the next 3-5 years are crucial for banking to adapt and adopt."
What financial professionals really think about Amazon's competitiveness
Our survey panel ranked Amazon the most competitive among all our choices for consumer banking. Over the short term, financial professionals see Amazon as a lurking threat to cut into consumer banking (3.538 out of 5). And over a 3-10 year period, they see Amazon's consumer banking competitiveness increasing even more (4.077 out of 5).
When it comes to commercial banking, our respondents also ranked Amazon highest in its competitiveness to change the status quo (3.231 out of 5 for 1-3 years and 4.231 out of 5 for 3-10 years). Financial professionals definitely see Amazon as a strong disrupter in its potential to impact business banking.
Facebook's competitiveness in consumer and commercial banking, according to the industry
Facebook isn't seen as a real threat in consumer banking, scoring the lowest of all the options in the short term (1.846 out of 5 over a 1-3 year period). The social network does score a bit higher among respondents when you look at a 3-10 year period (3.077 out of 5). That's just a bit better than how Transferwise and Apple rank.
When it comes to its competitiveness in commercial banking, Facebook scored lowest in both the short term (1.461) and the mid term (2.308). Facebook has dabbled with payments and crypto but hasn't demonstrated a strong product willingness to go after personal or business finance.
Apple: Getting stronger in consumer banking, not a player in business banking
In spite of Apple's recent launch of Apple Card with Goldman Sachs, financial professionals aren't really concerned the tech firm will make a dent in consumer banking in the short term. It ranked pretty low (2.615) in its competitiveness in short term. But after a few years, financial executives see Apple becoming more of a threat and improving its inroads into consumer banking (3.615).
The industry isn't that concerned with Apple entering strongly into commercial banking. The company has always had a reputation that it struggles to compete in the B2B market. Apple ranks low when it comes to competitiveness in the short term in commercial banking (1.769) and improves significantly over the medium term (2.846)
Google's competitiveness in banking
Google isn't seen as much of a threat eating into consumers' wallets in the short term (2.462). But that improves over the medium term (3.385) as our respondents see the firm improving its general consumer banking-like offerings.
Google ranks pretty much in the middle of the pack in terms of commercial banking competitiveness in the short term (2.308) and medium term (2.846).
Do challenger banks pose a real challenge in consumer banking?
Regardless of the headlines about how many new accounts the challenger banks are opening, the industry isn't that concerned about the likes of N26, Revolut, and Monzo. In the short term, these neobanks were ranked 3.308 and over the medium term, they clocked in at 3.538. So over time, they're seen as being increasingly competitive but so too are the other options we looked at.
What's really interesting is how the standalone challenger banks ranked compared to challenger banks being incubated by the big banking brands. In terms of consumer banking, they ranked exactly alike (3.308 in the short term and 3.538 in the medium term), though they had quite different distributions.
On the commercial side of things, respondents aren't that concerned about challenger banks. Firms like N26, Revolut and Monzo were ranked relatively low in the short term (2.154) but higher in the medium term (3.231).
In-house challenger banks don't seem so competitive
The financial community doesn't seem to be that concerned with new bank brands like Chase's Finn or Goldman Sach's Marcus. These types of institutions ranked relatively in the middle of the competition pack (3.308 in the short term and 3.538 in the medium term)
In-house challenger banks were ranked numerically lower in their competitiveness for commercial banking business (2.692 in the short term and 3.231 in the medium term). But when compared relatively to the competitiveness coming from other sources, like big tech and fintech, in-house challenger brands rank near the top of the competitiveness scale (#2 behind Amazon) in both short and medium terms.
Do insiders feel that Transferwise will become competitive to banks?
Transferwise has been launching new products and services in order to get a bigger share of wallet. The money transfer unicorn may indeed be getting more business from its users but the industry doesn't see it as a strong contender in consumer banking (scoring it 2.615 in the short term and 3.000 in the medium)
The firm doesn't score that much better when it comes to commercial banking (2.461 and 2.769).