Citibank launched a global developer platform last week, highlighting its eagerness to combat the threat of fintech startups by speeding up digital innovation.
The bank, which earns a ranking of Gifted in L2’s Digital IQ Index: Financial Services, has been one of the largest investors in the growing sector. Its fintech division includes employees who formerly worked at tech giants like Amazon and PayPal, reflecting Citibank’s ambition to bring the functionality of its mobile app up to the level of rival offerings.
More than $19 billion was invested in fintech startups last year, a rapid increase from under $2 million five years earlier, and Citi analysts predict that revenue could surge to more than $100 billion in the next four years – an increase of more than 10 times. Consumer banks are moving rapidly to combat the potential threat. Bank of America has allocated $3 billion towards fintech innovation, and Chase partners with startups OnDeck Capital and Digital Asset Holdings.
However, many financial institutions struggle to balance maintaining their traditional business lines with investment in new platforms, according to L2’s study. Just 40% of U.S. banks allocate at least a quarter of their IT budgets to digital transformation, and the global average is barely 8%. As digital continues to change the world of finance, banks will need to adapt and innovate in order to maintain their central role.