Costs

To continue being relevant for their customers, banks will have to keep the price of their products and services structurally acceptable. Because banking products are becoming increasingly standardised and interchangeable, price is a very important element for customers. An acceptable price can only be realised if the product has a low cost price as well as an appropriate margin on the costs price; low enough to keep the price acceptable and high enough to be sufficiently profitable for the bank and its shareholders. Naturally, it's all about ‘value for money’ for customers. However, in a market where products have become commodity products, price - and thus cost price - is an important competitive weapon. But it's not as if FinTech companies simply offer products at a much lower price. Those that are actually capable of offering added value (i.e. convenience), are capable of calculating a premium.

Pressure to reduce costs is expected to increase in the coming years, partly due to:

• a lower interest margin;

• more competition from FinTech;

• stricter capital requirements (Basel IV, IFRS9, etcetera).

Ever increasing digitalisation is causing economies of scale and new technologies to have a major impact on banks. FinTech companies are taking advantage of this because they are not restricted by legacy problems and face relatively low costs (i.e. compliance-related costs) thanks to new technologies and business models.