Fintech disruption

 

Being interested in the application of new technologies (understand how a traditional business model can be disrupted by new IT products, like taxi industry with Über, postal services impacted by the mail or leisure business (with AirBnB and the hotel industry)), I thought banking industry was worth some readings (a special report of The Economist to name it).

 

 

First, let's recap of what the core banking business is:

• organize the market place between borrowers and savers. Banks live on the interest margin between the two market players;
• organize the market payments, through offering several payments possibilities (credit cards, debit cards, international transfers etc.). Your local branch is charging you for this service;
• charging clients for several advices, like for brokerage or investments, for example.

All those three activities are, more or less, equally important in a global banking revenue (I don't take here specialized banks, like private banks or investments funds).

 

Now, if we think on the fintech industry (that is the industry of specific technology developments for financial services institutions), we have currently disruptive players for:

• the market place organization, where peer-to-peer lending platforms are taking place (Zopa, RateSetter, Kickstarter for example);
• charging for offering payment solutions is moving from the traditional banking sector to IT giants (think on Apple Pay or PayPal, where you can pay with a tap of your phone or watch);
• the role of the broker will be replaced by much more reliable algorithms, that will be able to analyze thousands of markets movements and predict what kind of investment suits your profile. There too, we could imagine that big data and the IT industry will offer cheaper advices - against a fixed price, for example, so that you don't have to pay the expensive Porsche of your private banker (and BTW, we already have the algorithm to drive the car as well...)