Wall Street banks' defense system against a growing onslaught of start-ups is working, according to a Moody's report, which says that while banks may lose some market share to financial technology competitors, industry incumbents will survive.
Banks have two big things most fintech, companies do not: enormous user bases, and sizable credit underwriting capabilities. While more start-ups may partner with big Wall Street firms, the Moody's report said it is highly unlikely that they'll ever overtake big banks.
"We expect banks to retain a place at the center of the financial services industry, working both alongside and in competition with fintechs to improve the development and delivery of financial services," Moody's analysts wrote Wednesday.
It's a sign that as various American industries are being disrupted by digital competitors, the banking industry — partly due to its vast funds, partly to it being more heavily regulated, and partly because traditional banks offer a broader range of services — will be able to stave off fintech's recent surge in popularity.
Banks' user bases are already starting to show up where it counts for fintech: in the app store.
"JPMorgan Chase, Bank of America and Wells Fargo have among the most downloaded mobile applications among financial services firms," the report stated.
They have already amassed more than 60 million users.
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It isn't merely a millennial trend; the report notes that in 2015 more than 50 percent of U.S. adults aged 30 to 44 used some form of mobile banking, according to Federal Reserve data. It's even a rising trend with baby boomers.
In a year where big banks have been forced to scale down trading operations, one of the areas which continued to be targeted by Wall Street is technology development.
In the face of fintech competitors, many banks have ramped up mobile offerings, providing card-less ATMs and increased app capability for users.
While fintech might not dethrone Wall Street's titans, it still has the opportunity to partner with some of them, the report said. JPMorgan Chase's partnership with On Deck Capital to help the business lender originate loans to its customer base is one example of a bank defending its turf, while at the same time embracing a fintech partner.
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Funding for start-ups shot from about $2.4 billion in 2011 to $19 billion in 2015, the report said. But after stinging scandals, including Lending Club's ongoing saga, some think the fintech space may be getting overcrowded. The report noted that investment in fintech companies has been relegated largely to consumer banking applications. One entrepreneur said this could set companies that plowed ahead into overcrowded parts of the growing industry for long-term fallout, however.
"We're at an inflection point," said Al Goldstein, CEO of online lender Avant. "The strong players will prosper and the challenges of weaker players will become more apparent."