"The banking industry as we know it today is about to face a storm.," said Bank Leumi (TASE: LUMI) CEO Rakefet Russak-Aminoach at the opening of the FT Innovate conference in London.
Russak-Aminoach who has led the digitalization policies of her bank, which will soon culminate in the launching of the Pepper digital bank, said that banking is about to undergo a revolution and those that don't understand that won't survive.
"Until today there was no incentive for us to change," she said. "The profits were good and the defensive moat, obstacles for full entry - protected us from invasion. The banking industry has been securely fortified for a long time. But that moat is now flooding its banks and we are clearly seeing this process in which all the obstacles to entry are starting to collapse. Consequently, if we don't undergo a transformation, we will simply become extinct."
"The most significant obstacle - trust
Russak-Aminoach pointed out that not everybody agrees with this approach. "From the inside, within the bank, many voices are asking why do we need to change? We have been successful for so many years. Why mend something that isn't broken? So I repeat to them that the world is changing and the walls that protect us are crumbling."
She added, "The regulatory and cost obstacles to entering the banking sector won't continue to protect banks for long. In my opinion, the most significant obstacle is trust. The banks, perhaps, are not especially liked so that even trust does not represent the obstacle to entry that it was in the past.
Russak-Aminoach said, "Research that was recently conducted among millennials found that 73% of them would prefer to receive financial services from companies like Apple, Google or Amazon than their bank. The conclusion we can draw from this is that the obstacle of trust is also in jeopardy. Therefore, we the traditional banks have only one choice. We must change our shape."
Russak-Aminoach also spoke about the upcoming launch of the Pepper digital bank. "We decided to set up a new venture that will be completely separate from our core business even if the significant thing is that we are competing with ourselves. I absolutely believe that the fact that Pepper is being established in Israel - the startup nation - where global companies like Waze and Taboola and many others were born - will help distinguish us and that ultimately we can also make Pepper into a global company."
Published by Globes [online], Israel business news - www.globes-online.com - on November 3, 2016
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