We’ve grown up with the belief that we need a bank account to store our capital. At the same time, modern technology and FinTech innovation have made it possible to create complex products and services at very little cost. Do we actually need more than only a single line in an online, distributed immutable ledger?
Even if only an anecdote, these types of questions are coming up with the rise of FinTech and its adoption. Granted that the anecdote is highly simplified, it does offer an interesting conundrum. Do we need a bank account or do we only need some place to store our money? And even further, with the proliferation of technology tools, specialist services, open interfaces, and a rising global computer literacy, is there any stopping the global emergence of new types of services that offer that exact service in a new way?
No, there isn’t. It’s just a matter of probabilities and a function of the number of people on planet earth, computer literacy, connectivity, the pain caused by the absence of services and the motivation that someone does something about it. I’d write that as a formula, but you get the point.
Further, given the adoption of technology where operating systems are largely universal, the global rollout of proven technology amongst generations can be realized within peer-to-peer networks. A bank executive recently explained to me how fundamentally global rollout has changed even for institutions like banks because effectively, most people are on the same handhelds and operating systems that solutions can be ‘dragged and dropped’ from country to country with a 90% fit. The rest is then user experience localization. If that’s the situation in a global bank with today’s technology, how innovative can we expect the global technical community to be with cutting-edge tools?
The question goes further, though – this distribution and decoupling of services that we can expect also questions the positioning of financial institutions of today. From the conversations I’ve had, it's clear one of the finance companies or banks biggest assets is its brand. Being a bank still means something, even despite all the talk. It’s a sign of credibility, of trust and of stability. Maybe people don’t love retail banks, but they still do respect the concept of a bank. Otherwise, they’d all be holding a bunch of cash or bitcoin, right?
Brand value is a real thing. As someone fascinated by cognitive psychology, I’ve studied the effects of brands on decision making as well as both perceived and experienced value. In financial services, a strong brand correlates to perceived safety and stability and appeals to both sides of a deal, the originator or sponsor and the investor; the higher the value of the deal and the more sophisticated the investor audience is, the truer this is.
How will brands develop through this decoupling of products and services? Are we going to see a large level of cooperation between established brands and new innovative upstarts or new services? We’re already seeing this.
Certainly, the fact that brands possess such great market value also means they are very protected and not easily borrowed. Yet, it seems like a marriage of two worlds where a large scale brand can be attached to a proven, yet innovative way of serving a mutual client through cooperation or consolidation. We’ve talked about this cooperation earlier in trends that we expect to materialize in 2017 (further reading: FinTech Trends and Predictions: Looking Ahead to 2017).
We’re going to see a distribution in financial services due to changes in technology. So why would you want to have your money with a bank? Because the bank's name still carries weight and makes you sleep better at night, whatever complaints you might have during the week. But what’s to say this isn’t just a line in the bank's distributed blockchain ledger? Maybe it indeed will be.