Fintechs are digitalising the car industry and banks must keep up

Winds of disruption seen in consumer payments and retail banking are heavier than ever in banks’ wholesale payments and cash management business, which generates annual revenues of more than $250bn. This business provides payments solutions for suppliers and liquidity management for treasurers.

Until recently, banks as incumbents have enjoyed returns on equity of 20% to 40% and have leveraged this business as an anchor for large corporate relationships (with opportunities for cross-selling). Fintechs and other non-banks have made a dent in the market share of these banks, and other banks like Goldman Sachs are entering this space too.

To protect their turf, incumbent banks must be ready to service emerging online business models in different industries by innovating at the intersection of digital lending and digital payments.

One area that is becoming increasingly digitalised is the automotive sector. Let’s look at the agenda for the next five years. We are starting to see shifts in investment towards electric car manufacturing. In Asia, non-banks like SP Mobility and Oyika are focused on installing charging stations. Non-bank platforms like Cazoo, Carvana, CarMax, Cars24, CARRO and olx are focused on converting motorbike owners to used-car owners in India, Latin America and Southeast Asia, where less than 12% of the population own cars (compared to more than 50% in the US). Other priorities include lowering distribution costs by 10% to 20% by eliminating traditional dealership models and revolutionising the concept of car ownership.

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