DO DIGITAL TECHNOLOGIES HAVE THE POWER TO DISRUPT COMMERCIAL BANKING?

Abstract

The hypothesis guiding this paper is if digital technologies have the power to alter the commercial banks’ set-up and the way they provide their services. This would suggest that the new types of (traditional) banking services and the new type of (traditional) banking service providers have emerged in the market. The paper describes the commercial banking services, the set-up commercial banks operate in and the changes occurring in the market triggered by financial technology (the FinTech firms). When researching the effects of financial technology, the paper focuses on the trends in the market and the efficiencies the new services are responsible for. The new service providers have shown that they are meeting the demands of the consumers/clients that banks have not, such as crowdfunding, or battling financial inclusion. The grand issue surrounding the FinTech sector is the lack of applicable regulatory environment. Challenges the regulators are faced with when designing the regulation applicable to the financial technology are the speed the services are evolving with and choosing the right moment to place regulation. The lack of adequate regulation leaves customers/clients unprotected. Nevertheless, the FinTech sector is growing rapidly. Indications in the market suggest the FinTech firms are leading the way the commercial banking sector will follow.