Disruptive tech puts banks in the crosshair

Global financial institutions may be too big to fail, but they may not be too big to disrupt.

Banking, investing, real estate, credit-card payments and insurance all face tech-driven forces that threaten business as usual, according to a report from the World Economic Forum.

Smartphone-enabled mobile-payment systems like Apple Pay, online banking, crowdfunding of businesses, automated financial analysis and advice and private exchanges for non-public equity shares in startups undermine financial sectors once solely controlled by large entities. And the continued emergence of so-called fintech, for financial technology, hasn't stopped. For example, a new entry is Realquidity, a company that lets commercial property owners sell shares in existing properties that have positive cash flows.

According to the WEF, four factors give these startups a chance:

• Consumers have become comfortable with online business and expect sophisticated digital experiences.
• Although banks finally regained a positive image in the fall of 2014, according to Gallup, lingering antipathy toward financial institutions after the global crash and trust of many technology companies have pushed many consumers toward new entries.
• The sheer number of new entries and amount of innovation have almost guaranteed a number will entice many consumers.
• Constant connections through mobile devices, automation and the ability to cut out middlemen provide solutions to problems that consumers may not have been aware they had.

Big banks, insurance companies and others are losing customers, who look to niche providers for services not available from long-time service providers. Technology also blurs boundaries between financial-service subsectors faster than large corporations can shift their business models and organizations to respond.

That said, financial giants can compete by acquiring the startups that can provide new services and technologies without spending the time to develop their own. The big companies can also collaborate with the new entrants to avoid becoming obsolete.