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Banks could lose 60% of retail profit to tech startups: study
DAVID BERMAN
BANKING REPORTER — The Globe and Mail
Published Tuesday, Sep. 29, 2015 8:01PM EDT
Last updated Wednesday, Sep. 30, 2015 9:22AM EDT

Banks could lose up to 60 per cent of their retail profits to nimble fintech firms within the next decade, according to global consultancy McKinsey & Co., offering a particularly alarming outlook as new financial technology players nibble away at some of the more vulnerable areas of traditional banking.
The consultancy said that altogether banks are producing profit of some $1-trillion (U.S.) globally, providing a powerful incentive for startups to grab even a thin slice of that business with cheaper or more convenient services. Given that the number of startups is now estimated at
12,000, these slices can add up to a major threat.
“The changes to come over the next 10 years will be less visible than the global financial crisis or the bursting of the dot-com bubble – and yet their impact on banking’s economics and even fundamental business models will be much more substantial,” McKinsey said in its 2015 annual review of global banking, released on Wednesday.
To quantify the threat, McKinsey looked at different business lines within traditional banks, and found that five retail lines were particularly vulnerable because many startups can improve the customer experience through appealing technology.
Consumer finance – the banks’ core business of deposit taking and lending – is deemed the most at-risk: McKinsey estimates that 60 per cent of profit and 40 per cent of revenue could disappear by 2025, though the impact could vary by country. In dollar terms, $674-billion in global bank revenue would shrink to less than $400-billion.
In Canada, retail banking accounts for 50 per cent to 70 per cent of the profits of the Big Six banks, underlining why chief

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