Han de Jong, Chief Economist
Han de Jong, Chief Economist, ABN AMRO is one of the speakers at the Mortgage Week 2016. During his lecture he will talk about the funding gap, and give an overview of the European and Dutch Housing market and future outline for the coming 5 years.
Below you find an interview with Han de Jong.
“The biggest problem with the funding gap is that many people in the Netherlands save through pension funds. And because these are forced savings, there are relatively few free savings to be seen. As a result, people end up with relatively high debts because they want a mortgage to buy a house. This results in banks needing to provide these substantial mortgages. Funding for these mortgages comes from family savings, but the amount available is, in comparison, very small. And that’s the funding gap.
Banks solve this problem by attracting funds through the bond market or the interbank market. This works fine, in general, but the whole thing becomes vulnerable if there are liquidity problems on these bond markets and interbank markets, like we saw in 2008.”
“The challenges regarding FinTech are huge; you could say that the entire banking industry could be disrupted by the arrival of FinTech.” An increasing number of FinTech companies are popping up that develop new, technology-based solutions in fields in which banks operate. These companies can often do this more efficiently and cheaper than the banks. Furthermore, FinTech companies do not have a legacy. Banks have a huge history in the form of existing systems and portfolios. FinTech companies don’t have this and, as a result, are not limited in their activities.
Potentially, a very large part of the business of banks will change as a result of the influence of FinTech. It’s pretty unpredictable where and how exactly this is going to happen.
But it is not just the banks that are facing challenges; FinTech companies are facing challenges of their own. First of all, you need a permit to provide banking services. This permit also brings audits and many different requirements to a company. For small businesses this is often extremely difficult. They produce something, but it remains to be seen whether or not they will be able to implement it.
Secondly, they have problems with scale. The products they produce are very scalable. When the product is complete, it often makes no difference whether they sell it to 1, 10 or 1000 people. However, they do not have access to this scale. While banks do.
These problems are, therefore, opportunities for banks. Banks will start cooperating with FinTech companies; they may even take over the company to use the services and maybe even the entire company in the best possible way. The banks that turn out to be the best at doing this will be the most successful.”
“New players have different consequences. Existing banks in the Netherlands already have a large mortgage portfolio. They don’t necessarily need to expand this portfolio, allowing new entrants to take care of net market growth. However, banks may also think this is moving too fast and be worried that they are losing too much market share. While, on the one hand, this is good for the banks, it does also pose a threat. What actually happens as a result of this is that competition is becoming incredibly fierce. An existing party never enjoys increased competition and the resulting shrinkage of profit margins, but this is part of doing business.”
Read more about the Mortgage Week 2016.
Geplaatst op: 24 mei 2016
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