Commercial banks that turn this situation around will gain handsome rewards—they will be able to uncover substantial opportunities to grow revenues, reduce costs and curb customer attrition. Perhaps even more significantly, they will be empowered to compete in new ways with fintechs, e-commerce companies, payments platforms and other rivals emerging from adjacent markets.
Such companies are using their mastery of data to target lucrative parts of the banking value chain. Consultancy 11:FS, for instance, highlights the fact that Shopify is now the tenth-largest platform providing financial services for SMBs in the US. Shopify plans to embed an end-to-end lending application programming interface (API) from Stripe Capital within its platform to offer financing to SMBs.
The market expects companies like Stripe and Shopify to show strong growth in the next few years, some of which may come at the expense of banks. It is rewarding the two companies with rich market valuations relative to even digitally mature incumbent banks. Shopify and Square command price/book ratios of around 17 and 40 respectively, compared to averages of between 1 and 2 for most large US banks.