Is There Technological Turmoil In The Financial Services Industry?
Traditional financial service providers could see $4.7 billion in annual revenue migrate to online innovators, an analyst said Friday.
Goldman Sachs' Heath P. Terry offered a look at the industry in a report Friday that was light on investment advise but heavy on blue-sky thinking.
Trends in technology and social behavior are redistributing profit and revenue among existing companies and new entrants, according to Terry.
Segments ripe for innovation include lending, payments, wealth management and crowd funding, Terry said.
The eBay Inc (NASDAQ: EBAY) unit PayPal, founded in 1998, along with newer entrants like Yodlee Inc (NASDAQ: YDLE) and Financial Engines Inc (NASDAQ: FNGN), are working to adapt to the brave new world envisioned by Terry.
But traditional banks, asset managers and payments companies are taking similar measures.
In the realm of personal investing, platforms like Openfolio, Estimize and Mint are creating transparency and making data available "that is empowering consumers to make their own investment decisions," Terry said.
If innovators capture a 20 percent share of the financial services industry, Terry said that traditional providers will have at risk annual profits of $470 billion and revenue of $4.7 billion.
By way of a benchmark, in both e-commerce and travel, Terry figures online innovators have captured a market share of between 10 percent and 30 percent.
More than with other online categories up until now, Terry expects "partnerships, acquisitions, and co-operative competition will be key to the way the vertical develops."
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