Markets are choppy and the economic outlook is grim but 2019 could be a year of banking renaissance, writes Brian Caplen.

Whatever economic gloom 2019 brings, the good news is that, in general, banks are in a far better place to deal with it than when the financial crisis hit a decade ago. Capital ratios are higher, lending is prudent and regulatory scrutiny more exacting. Stock markets may wobble but banks should be able to deal with the turmoil this produces.

The bigger challenge facing banks is the competition from fintechs big and small, the need to embrace the digital revolution and the pressure to cut costs. But even here the signs are that banks are striking back, with success stories from the likes of ING, Santander and Wells Fargo suggesting that incumbents can win the tech race if they have the right strategy.

The point is that winning in digital is not all about technology. Having the best technology does not ensure victory; having the best business model does. With the more ambitious artificial intelligence and blockchain solutions now being put into the longer term investment box, the focus is on less exotic, practical solutions with a solid business case. Here banks are illustrating that market knowledge, the resources to try multiple solutions and a solid customer base can win out against state-of-the-art technology and pure entrepreneurial zeal.  

Besides, the leading banks have sufficiently invested in digital to improve customer experience to a point where the fintechs no longer have an overwhelming advantage. Equally, investor backers of fintechs are becoming more cautious about advancing funds unless they can see a clear business case and track to profitability.

In 2019 we will see more fintechs struggling unless their concept is sufficiently advanced to have a partnership with a bank. We will also see more banks getting payback from their digital investments and feeling more secure of their position, whatever the economic weather. 

Brian Caplen is the editor of The Banker. Follow him on Twitter @BrianCaplen

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