STAMFORD, Conn.—Traditional financial institutions and insurance companies are facing extinction in the next decade due to increased digitization in the financial services sector, asserts a new forecast reveals.
According to forecasts from research company Gartner as many as 80% of what it calls “heritage financial firms” will either have gone out of business or be considered irrelevant within 12 years, reported the Irish Times.
The report suggests financial institutions and insurers face a growing risk of failure if they continue to maintain 20th century business and operating models, arguing “heritage firms” will struggle for relevance as global digital platforms, fintech companies and other non-traditional players gain greater market share by using technology to change the economics and business models of the industry.
“Digital transformation is largely a myth as institutional mindsets, processes and structures stand firm,” said Gartner Analyst David Furlonger in the report. “Established financial services providers will have to move faster on digital business by building digital platforms or finding niche products and services to sell on others’ platforms.”
The research company warned many banks and insurers are underestimating the degree of change that digital technology will bring to the industry in the coming years, the Irish Times noted.
In addition, it posited: emerging technologies such as blockchain offer transformational opportunities by creating trust between parties that do not know each other, without intermediary relationships that incumbent financial firms cultivate.