BCBS presents different scenarios in the light of emerging technology in the Banking sector. The Basel Committee on Banking Supervision (BCBS) in its latest report has analyzed the effect of Fintech firms on the emerging banking services and the future of the financial services industry.
The paper deliberated on the implication of fast changing technology on the financial industry.
The report presented various scenarios and the common conclusion across these scenarios points to the fact that the conventional banks will find it difficult to operate under current business models and future of banking will be centered on customer relationships.
The five scenarios mentioned in the report are here under:
- Better bank: the traditional banks will replace their current operating structure with the introduction of digitization
- New bank: this scenario will materialize in the event the incumbents were unable to survive the onslaught of disruptive new banks. The new banks will employ the advanced technology to provide cost-effective services in the innovative way.
- The distributed bank: there will be fragmentation of services between the specialized fintech firms and the incumbent banks.
- The relegated banks: the banking services will become commoditized and new intermediaries will be involved with customer relationships.
- The disintermediated bank: The banks themselves will become irrelevant as the customers will be involved with individual service providers.
According to BCBS, the current pace of technology poses both the risks and opportunities for the incumbent players, even though this industry went through various phases in the past.