Banks face gradual fintech erosion rather than a Kodak-style collapse

Incumbent banks remain dominant in deposits, lending and corporate banking despite more than 15 years of predictions that fintech would displace them, according to Joris Lochy, product manager at Vyntra and co-founder of Capilever. In an external opinion published by Finextra, Lochy argues that the larger risk for banks is a slow loss of relevance as artificial intelligence, real-time payments, embedded finance and other technologies develop faster than large institutions can implement them.

Lochy frames the issue through Clayton Christensen’s concept of the innovator’s dilemma, in which established companies often reject early-stage technologies because they initially serve smaller markets, produce lower margins or look inferior to existing products. He cites examples including Xerox PARC’s work on graphical interfaces and the computer mouse, Kodak’s 1975 digital camera, Nokia’s position in mobile phones, BlackBerry’s focus on physical keyboards, Yahoo’s missed openings in search, social media and mobile, and Blockbuster’s failure to build a streaming business before Netflix became dominant.

The common thread, Lochy writes, is that large companies often have the ideas and technical capability, but struggle to act when new products threaten existing profit pools. In his analysis, the constraint is usually organisational rather than technological: governance layers, procurement, legal review, risk controls and quarterly performance expectations slow decisions and discourage management teams from weakening profitable legacy businesses.

Why banking may not follow Kodak

Lochy says banking differs from sectors such as photography, video rental and mobile handsets because financial services depend heavily on trust, regulation and capital requirements. Customers may try new consumer applications quickly, he argues, but moving savings, mortgages or pension assets involves a higher threshold of confidence.

He also notes that regulation, often described as a barrier to innovation, can protect incumbent banks because new entrants must eventually meet the same compliance burden. According to Lochy, many fintechs that set out to challenge banks have later sought banking licences, built compliance teams and hired bankers, making them more similar to the institutions they intended to disrupt.

That has not eliminated competitive pressure. Lochy says digital-only challengers such as Revolut, N26 and Monzo, along with waves including online banking, mobile banking, cryptocurrencies, open banking, buy-now-pay-later, embedded finance and AI, have changed customer expectations. Banks have invested billions in digital channels, cloud migration, fraud detection, anti-money laundering, payments modernisation and cybersecurity, but customers tend to judge them by visible services such as mobile apps, onboarding and user experience.

AI changes the pace of competition

Lochy identifies execution speed as the central gap between banks and fintechs. In his account, banks optimise for stability, predictability, compliance and risk reduction, while fintechs focus on experimentation and rapid learning.

Artificial intelligence may intensify that gap, he writes. Earlier technology shifts could often be addressed through acquisitions, external vendors or consulting projects. AI, in Lochy’s view, can create advantages within months, which makes an institution’s ability to learn and adapt a competitive factor in its own right.

Lochy’s conclusion is that a sudden “Kodak moment” for banks is less likely than a drawn-out transfer of value toward fintechs, AI-focused companies and digital platforms. He argues that incumbents are not protected from disruption, even if trust, regulation and customer inertia make the process slower than in other industries.

This story draws on original reporting from Finextra Research.