Money evolution: How the shift from analogue to digital is transforming financial services

The digital revolution is finally trickling down to the financial services industry. While banks have been responsible historically for many of the innovations in payments such as the credit card and online banking, their vertically integrated business models are ill-suited for today’s multichannel world brought about by the internet, the smartphone, big data, social media and cloud computing. This paper contends that internet-enabled financial technology firms are acting as a catalyst to the digitisation of money by offering a genuine alternative to the customer-facing payments services of banks and traditional institutions. Leveraging technology, lean business models and widespread dissatisfaction with traditional banking, ‘New Finance’ firms focus on optimising specific components of the financial value chain and delivering improved customer service, lower costs and greater efficiencies for end users. Their entry is forcing both businesses and consumers to redefine what they expect of financial services. The paper examines some of the trends bringing about the digitisation of financial services, current innovations in payments and how banks should manage their relationships with financial technology start-ups to adapt to the transition to digital services.