At a time when the banking sector is facing extreme turmoil, fintech companies are making sweeping inroads in the sector.
The sector is currently experiencing its worst days since the 2008 financial crisis following the rapid collapse of a bank that was part of the global financial and banking industry’s history (Credit Suisse, formerly the house of security and reassurance for the world’s richest elite).
This came on the heels of the collapse of Silicon Valley Bank (the destination of pioneering technology companies), First Republic Bank, and Signature Bank.
Since then, Apple has gained a foothold into the sector, while bankers are struggling with the Fed’s ongoing rate hikes without a clear horizon.
Confidence and safety shaken
Two key factors govern banking globally: Confidence and safety. When compromised for any reason — whether economic, political, legislative, administrative, or moral — the banking industry loses the trust of its customers and investors and their connection to its services.
The recent banking crisis in the United States and Europe — despite their haste to contain it — reveals a deep imbalance in banking in terms of asset management and future risk assessment, including reputational risk.
In the age of social media, this can destroy the most prestigious banks overnight due to the rapid circulation of negative reports about any financial institution.
Although the US banking sector, which has born the brunt of the financial turmoil, was able to achieve profits of about $80bn in the first quarter of this year — an increase of 33% from the previous year, according to The Financial Times, these profits can evaporate at any moment.
The profits have been buoyed by rising credit interest as a result of the Fed’s year-long strict monetary policy meant to curb inflation by raising rates to 5-5.25% in early May — the highest in nearly 16 years.