Financial services need to harness innovation to create better customer outcomes at the risk of self-disruption according to management consultant Oliver Wyman while fintech hub, The Floor, argues that banking is striking back in innovation.

Oliver Wyman’s State of the Financial Services Industry 2018 report said incumbents have largely recovered since the financial crisis but are concerned about prospects for future underlying growth.

The Customer Value Gap: Oliver Wyman is launching its annual State of the Financial Services Industry report today @WEF. The 2018 edition offers perspectives on how #BigTech can help the industry understand the #valuegap: https://t.co/7kvTgQ935q #SOFS #OWFinancialServices #WEF18 pic.twitter.com/uc9fJWyzE3

— Oliver Wyman (@OliverWyman) January 23, 2018

The consultancy continued that the financial industry is innovating but change is focused on sustaining existing businesses rather than jumpstarting new growth. Instead financial services should harness innovation towards creating better customer outcomes, even at the risk of self-disruption and the possible short-term loss of shareholder value.

“Someone is going to build Google Maps for financial lives. Maybe it will be Google, Amazon or Alibaba. Maybe it will be JPMorgan Chase, BBVA, or MetLife,” added Oliver Wyman. “We believe it is going to happen and likely to happen soon.”

The Floor, a fintech hub based at the Tel Aviv Stock Exchange, argued in Banking Innovation Strikes Back that banks are leading a corporate wave in blockchain innovation which will lead to a new era of financial services.

"Who do you think is more disruptive? Uber & Airbnb or the banking industry?" @TheFloorHubTLV has released its latest report, 'Banking Innovation Strikes Back'. A must read: https://t.co/vNpcyGraE8

— SAN InnoVentures (@SanInnoventures) January 23, 2018

The report acknowledged that new competitors such as Google, Apple, Facebook, and Amazon have emerged since the financial crisis. For example, Amazon offers loans to small businesses and Facebook has a new payments feature for Messenger’s 1.2 billion users.

Roberto Mancone, global head disruptive technologies and solutions, private wealth & commercial clients division at Deutsche Bank, said in the report: “Regulatory changes such as PSD2 are opening the way to Google, Apple, Facebook, and Amazon to redesign and change the way traditional banking activity is perceived by clients: they already have access to Big Data and know how to leverage such info. With access to transactional data, they close the circle.”

PSD2 is the revised payments regulation in the European Union which aims to increase competition by letting third party providers operate across the region provided they are licensed by their home regulator.

Dejan Kusalovic, global head of fintech enabling at Intel, argued in the report that technology firms will develop products from a data oriented approach while the incumbent banks have strong customer relationships.

“In addition the banks understand regulation and compliance and any secure solution needs to still meet these requirements,” said Kusalovic. “The weakness of these incumbents is they may not take the threat seriously enough. Also they may rush to form partnerships that are not advantageous. For instance allowing a tech firm to get in between them and their customer would not be a strong strategy.”

Keren Chavkin-Lior, head of Europe international enterprise infrastructure at HSBC, predicted in the report that banks will migrate away from legacy client applications and task-specifc data warehouses to Big Data tools in order to analyse client and transaction data more quickly.

“The aim is to deliver insights that can provide commercial application for data visualization, predictive modelling, and recommender systems supporting a smarter way of undertaking business,” added Chavkin-Lior. “The potential for banks to boost earnings and save money with artificial intelligence and related technologies will skyrocket in the future.”

The Floor continued that banks have partnered with fintech firms and  are on track to introduce high impact innovations in payments, articial intelligence, identity, compliance and trading. For example, Ethereum Alliance includes many of the largest banking and technology firms with fintechs to develop blockchain technology.

This week three banks – ABN Amro, ING and Societe Generale – together with Louis Dreyfus, Shandong Bohi Industry said they successfully completed the first full agricultural commodity transaction using a blockchain platform to execute a soybean shipment transaction from the United States to China. The Easy Trading Connect blockchain prototype mirrored the paper-based process but time spent processing documents and data was reduced fivefold. In addition, there were benefits in the ability to monitor the operation’s progress in real time, data verification, reduced risk of fraud, and a shorter cash cycle.

Karin Kersten, head of trade & commodity finance at ABN Amro, said in a statement: “The blockchain technology has the potential to significantly optimise administrative processes around international trade. We are excited that this test was succesfully completed and that we can move to further exploring the added value and use of the blockchain technology.”