Where does all this leave banks? Many fintechs, with their shinier apps and better risk analytics, certainly have an edge over them. But these firms are not trying to usurp lenders. This is because banking is made of two parts, says Miklós Dietz of McKinsey, a consultancy. “Core banking”—heavily regulated, capital-intensive activities such as running a balance-sheet—makes $3trn in revenue worldwide, and returns on equity (roe) of 5-6%. By contrast, freer-wheeling lines of business, such as payments or product distribution, yield $2.5trn in sales but roes of 20%. Fintechs are after the tasty bits. But for this, they need banks to stay alive.
Mario Randholm Blog. Mario is the founder of Randholm & Co. S.A.C., an investment management company dedicated to producing superior returns for its clients and employees by adhering to mathematical and statistical methods.