Banks are actually data companies, and should behave that way.
When you walk into a bank today, what do you see?
Gold bars, silver bullion, barrels of coins? No.
Stock certificates, Treasury notes, bond coupons? No.
Everything is digital, and all of it is accounted for within data centers.
So, banks really are data companies.
The biggest banks know this, of course, and invest billions to ensure their technology is on par with Silicon Valley tech giants: JP Morgan spends more than $2 billion per year on technology and, at Goldman Sachs, a quarter of the workforce is from computer engineering!
Banks need to incorporate technology improvements as a core competency in their operations. For security — automating repetitive human actions reduces errors; for cost efficiencies — less people, papers, fax machines, to get the job done; and, for improved customer experience — less waiting, shorter time to fund, more tightly targeted ads.
Developing all this technology de novo by these banks is expensive — as a result, the sector’s gone through massive consolidation in order to spread that cost over more customers.
In addition to developing new technology — difficult enough — the complexity of maintaining compliance across financial institutions and systems is an even bigger hurdle. Reducing the fixed costs of tech compliance is the biggest line-item factor underpinning sector consolidation.
Over the past two decades, the number of community banks shrank from 15,000 to 5,000, according to an Economist report on this vanishing market segment. On average, five banks are disappearing each week through M&A. The trend is so serious that the FDIC wrote a handbook to encourage people to start new banks. Even so, only a dozen applications have been filed!
Other countries are more advanced. Across the pond, the UK is fostering innovation by requiring banks to share their data.
Thanks to the new rules on open banking, UK banks are required to share their current account holder data through application programming interfaces (API) so that third parties, such as challenger banks, fintechs, or tech companies can tap into the treasure customer data to provide better, more personalized products to the consumers.
As a result, we’ve witnessed launches and hyper adoption of challenger banks, such as Monzo and Revolut, which are on pace to triple customer their number of customers, while the rest of the banking industry is expected to grow by less than 1%.
Ultimately, it’s the mastery of data through technology that’s determining the fortunes of banks.
But what can a regional bank really do if only the biggest have the budget or expertise to tackle this challenge internally, or when two smaller players merging won’t even improve their ability to compete?
We designed our platform around all key constituents we serve — digital brands, banks and regulators. Digital brands, including FinTechs, will have a delightful product and engineering experience using our dev-focused APIs and SDKs to build out their solution, with intuitive guides that help them through the currently onerous and manual onboarding with bank partners. Banks can sleep well at night knowing that 300+ item checklists are reduced to automated, human-in-the-loop processes with pinpoint accuracy. Regulators will breath easier knowing there is one highly secure place for consistent data monitoring and reporting, and our communications are encrypted, no more emailing sensitive files back and forth (even worse — sending the wrong PII-heavy file to the wrong person).
Partnering with Bond is the best strategy for creative management teams at those smaller, regional and specialized banks who realize their banks really are data companies and want to behave that way.