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Shaping the future of finance

Don’t be a wolf in sheep’s clothing if you’re not a wolf

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There are so many people who have been saying banks are boring, unable to change, incapable of being truly digital and challenged by challenger banks and fintech. Yet, here we are, almost at the start of 2023, and all of the challengers and start-ups are begging for banks to work with them. What’s happened?

In simplistic terms, it’s a recession. When you look at Tier 1 bank results over the course of this year, they’ve been better than ever. You always make more margin when customers are financially distressed. On the other hand, the start-up marketplace of which most FinTech companies are involved, are struggling. The struggle is funding, cashflow, run-rate and ability to just keep going.

This makes the outlook for 2023 interesting, and there are a number of trends we could forecast.

First, most FinTechs are desperate to work with banks to keep going. As a result, most banks have a great opportunity to pick-up partners at discount rates. Having trouble with KYC? Here’s a solution for a tenth of the cost in 2000. Want to solve that online checkout issue? Here’s a solution for free!

Second, if FinTechs cannot partner with your bank, maybe your bank should buy them. I know of many FinTech firms looking for a quick and easy exit. Founders want to sell-out and, facing hard times, are willing to do a deal. Is it time to think of buying a firm? If nothing else, you get their talent.

Third, if a bank doesn’t buy a FinTech then a FinTech will buy a FinTech. There’s going to be huge amounts of market change in 2023, through M&A consolidation. A little like the 1999 internet bust, there will be firms that come out of this crisis bigger and stronger but, for every firm that succeeds, a hundred will disappear. Bearing in mind there are 25,000 or more start-up FinTech firms out there, that makes cheap pickings for anyone with the money that they don’t have.

Fourth, banks can double-down in 2023 on their digital strategies and succeed in carving out market space where they’ve previously struggled. Closing down branches and physical operations, augmenting digital services with enhanced partnerships and acquisitions, creates major opportunities for 2023 in all areas of banking.

On this final point, it is true that banks that are strong in the markets today will be stronger tomorrow. However, if you are considering diversification into other areas of finance, do not take this decision lightly, For example, it’s interesting that Goldman Sachs is retrenching their thinking after the launch of Marcus, their retail digital challenger bank. Why are they retrenching? Because the bank makes no money, is a bottomless hole of investment and has caused significant internal soul-searching. According to reporting from external commentators David Solomon, Goldman’s CEO, wanted Marcus to be a fully formed retail bank offering checking accounts but his management team disagreed.

Marcus will go down in history as an example of an attempt to disrupt markets from what people will call ‘an incumbent’. Even an incumbent cannot understand their markets, when they specialise in one and not another. I applaud Goldman Sachs attempt to break into the retail markets, and particularly their work with Apple, but maybe the lesson learned is to stick to your knitting? Time will tell.

The outcome as a lesson for 2023, is that next year offers great opportunities to expand services and grab market share, but you can only do this if you are qualified. If you are a retail bank, there is a great opportunity to become a bigger and better digital retail bank through M&A. But only do this if you are confident in your own core competencies and don’t buy services outside of your field of expertise, as evidenced by the submission of Marcus to market forces. Equally, if you are an investment bank, you can become a bigger and better investment bank in 2023, just don’t try to enter markets where you have no expertise.

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Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog,, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...

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