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72 artificial intelligence, blockchain). Now, they are leveraging these capabilities and services to win in the traditionally relationship-driven markets such as small business, community, and commercial banking. It's not a coincidence that JPMC purchased WePay, a small-business payments service, as its first major financial technology purchase. roughout the organization, the message is consistent: win the customer through enhanced digital customer experience by focusing and investing heavily in financial technology. Another way that large banks have been redefining themselves is essentially building a new bank catering to a new generation without the traditional silos. Goldman Sachs has been building and acquiring capabilities for the last couple of years. It launched Marcus by Goldman Sachs in 2016, made more than 37 acquisitions, and is the top investor in financial technologies among the top 11 US banks. Its goal is clear—building a silo-less, service-driven bank of the future for a segment of customers outside of its traditional investment banking bread-and-butter. What's different here is that the large banks have new targets they are focusing on beyond their core businesses. is includes small business lending and back-office automation, consumer and commercial real estate, and personal lending. In other words, the traditional strongholds of regional banks. For the regionals, not only is Silicon Valley coming, the big banks are coming as well. Between the startups exposing gaps in customer experiences, the large banks pivoting, and the post-Great Recession regulatory landscape— which introduced new guidelines and compliance challenges—a wave of consolidation can be expected. is is due to customer migration and disparity in the cost of doing business between banks that are technologically capable and those that aren't. WHAT DOES INNOVATION MEAN FOR REGIONAL AND SUPER-REGIONAL BANKS? As digital adoption increases across demographics, there will be an increasing demand for regional banks to offer digital capabilities. To remain competitive in the age of fintech, regional banks must embrace digital capabilities. is is crucial due to aging current customers and new customers who are not as loyal to the regional banks as the previous generation. ese banks must focus innovation on customers and employees. Customers expect to be able to perform basic functions online and on mobile apps, such as: » checking balances » transferring funds » paying bills » peer-to-peer payments » depositing checks Bank employees also require basic functions such as: » mobile connectivity » tools for use in the field by relationship managers and bank employees ese capabilities no longer set the bar for consumers as they are now basic expectations for most, and the next generation of capabilities is already here. As banks search for new revenue streams, large banks are able to leverage technology to expand their relationships with their customers—which traditionally involve face-to-face discussions—through digital channels and compete more directly with regionals. Many large banks are using fintech to offer the newest technologies and digital experience. Regional banks must focus on providing these basic digital capabilities just to stay competitive with larger national banks. Investments and purchases in new capabilities 37% 48% 41% 30% 22% 15% 9% 18-24 yrs 25-34 yrs 35-44 yrs 45-54 yrs 55-64 yrs 65-74 yrs 75 yrs and older Use of Fintech products is highest among young adults at the early stage of their career Fintech is still more prevalent in large cities, but is also gaining traction in other areas Capital/Large City Medium/Small City Regional/Rural Area 42% 28% 24%