Nowadays the financial institutions are at the disruption tipping point. We can read in the PwC report “Digital disruption: how Fintech is forcing banking to a tipping point” that the investment in private fintech companies increased over ten times in the past five years. These companies take advantages of scale and innovation.

Jamie Dimon, CEO of JPMorgan has noted: “Silicon Valley is coming. There are hundreds of startups with a lot of brains and money working on various alternatives to traditional banking.”

This is why $19 billion of investment in 2015 was up two-thirds from $12 billion in 2014.

One of the most important reasons for this success is that the fintech companies do not rely on physical assets. This phenomenom is called “Banking’s Uber Moment.” The reduction in staff between 2016 and 2025 is estimated at 30%. Currently, the banks should be concentrated on automation and focus on advisory rather than on the transactions. In this case, the Blockchain may appear to be a next big thing. Although Blockchain might not entirely replace the core current financial infrastructure, it will stimulate the financial institutions to rebuild legacy systems.

The next challenge, which the banking industry is facing, is the recent mobile internet and smartphone revolution. The competitors are coming in the payment area. Everyone has heard about Bitcoin or PayPal. It is not a surprise that the activities, which are not capital-intensive, are more likely to be disrupted by game changers. However, this is rather an opportunity loss for banks than a loss of existing earnings. The payment segment makes up only ~7% of the bank’s income. The second area, where banks are giving up future growth opportunities, is e-commerce. The high risk is generated by the intermediaries getting in between banks and their clients.

Greg Baxter, the Global Head of Digital Strategy at Citi, claims that the consumer business constitutes the most attractive target for disruptors. The “front office” represents a more profitable part of the value chain. These type of activities require no infrastructure, regulation or scale. It is necessary to mention the global differences in Government approaches to FinTech revolution. For instance, the European Governments are implementing a pro-FinTech philosophy.

There is a question if a FinTech bubble exists. Johan Lundberg explains “If FinTech investments are no more than 4% of the total IT spend within the banking/financial industry it is NOT a bubble. The valuation of FinTech has gone down since August 2015. We see more healthy valuations today, which is good for FinTech investors.”

There more and more speculations where the digital disruption will lead to. However, the experts are sure that the banks have to create the competitive digital offering and rethink their current strategy. The omni-channel strategy is believed to be the first step in remaining the most relevant market players.