City CEO: 'The whole banking model is a bit broken' and at risk of an Uber moment
Sam Smith told BI: "If they don't change it, and I don't believe they will, you'll have new and up-and-coming players that will take the market. It will be like how Uber smashed that entire market. It's become a multi-billion dollar company almost overnight because people weren't servicing the market in the right way."
Smith is not the only person to warn of possible Uber-style disruption in banking. Former Barclays CEO Antony Jenkins predicted an "Uber moment" for banking last year and even the Bank of England has mentioned the car-hailing app in relation to financial disruption.
Banks are facing a wave of competition from tech-focused startups such as app-only banks Mondo, Starling, Tandem, and Atom. Many players are also offering specific online services, such as international money transfer with TransferWise or lending out money with RateSetter.
Many of these startups, particularly the new challenger banks emphasise how they can help customers manage their finances and plan for the future and Smith believes it is this focus on culture and company missions that gives them an edge.
She says: "I think finance needs to move and large companies need to move in the direction that startups and small and medium-sized companies are going, which is thinking about what they're doing, selling what they are there. I think the whole banking model is a bit broken. Longterm, I don't think companies want banks that don't care about what they're doing."
Former Barclays executive Rich Ricci made a similar point earlier this year, saying the current wave of fintech represents "a fundamental shift" in financial services to meet the needs of millennials.
She says: "You see the up-and-comings, what will be the businesses of the future - they've all got a purpose, they all care about the why, they care about a mission that's about social good as well as for profit. They're quite different outlooks to some of the traditional guys and in financials I think it's massively important. We're so behind the curve.
"You look at the big investment banks - where do anyone of them say their mission is anything other than to make money. Culturally, I think that's a massive, massive problem.
"At finnCap, we say we're about helping ambitious companies to grow. Obviously, we want to make money and that is important, but when you care about the company, you get something out of it."
Despite believing that banks must change their cultures, Smith believes they are too big to do it themselves. She says: "The model and the market will change it for them. If you're a big bank and you're not getting it, we're already seeing lots of different competition. The next generation of people leaving school, where are they going to go? I think it's time for the consumer to make the change for them. I personally don't think the big banks will change by themselves."