BBVA acquires Finnish banking startup Holvi

My impression is that the main issue is that the bankers really don't understand software development, which is a bit ironic since they are heavily dependent on huge it-departments and behemoth systems, and banks were forerunners of the digital age - decades ago.

(I am not talking about traders and algo-wizards here, but the guys making sure that your salary is paid and the mortgages are billed, and the ATMs are spitting out money...)

The development departments are typically competent but also a bit aged and COBOL centered, and while it's nothing wrong with that per se, it tends to makes some changes harder than they have to be because of technical and cultural issues.

As the (top) management do not understand software development, which is similar in some ways, but vastly different in many other fundamental ways from business administration and also all other engineering fields, they are doing it wrong and without the right sort of people in charge or in the teams, [skipping a bit about hordes of coordinators, "business architects", and "requirement specialists" (and some developers) that don't understand neither the business nor code here...] and the end-result is long projects, low throughput, and unpolished and amateurish services.

And yes - the systems are insanely complex and old, and they get insane amount of new regulations coming, and they keep adding complexity to keep up, as the systems are only cost centers and to replace something is insanely expensive. (Although typically only a fraction of the quarterly earnings for the relevant business units within the bank.)

Because of this, the development projects don't go that well, and the bankers are not at all impressed with the performance of their own it-departments.

So the banker are now looking at the fintechs, and their perceived development force, and all the buzz about digitalization and disruption- and they are afraid that this will undercut their margins, and while that is probably true given all of the above, they somehow fail to see that virtually all their own services are already digital - or built on top of a digital service with a thin administrative physical process on top.

There are actually probably no truly disruptive threats - (BitCoin and distributed ledgers are actually not that competitive to a trusted 3rd party solution, as everything already is digital ) but there are absolutely profit margins that are in danger, until now typically on products that already is low-margin - probably because the market already works there, the others products are too regulated for others to enter.

The major difference is that the fintechs are prepared to invest a lot of money for a small cut of the margins - possibly trying to grow into ubiquity - probably unrealistic, while the banks have historically focused on spending as little as they can get away with on "admin" while still enjoying high margins on a traditionally oligopolistic market.