This week we saw extended debate about the fluctuating future of the financial industry. How is the digital age changing banks and credit unions? What should financial institutions do with their legacy systems? One proposed solution, supported numerous times in this week's stories, is for financial institutions and fintech startups to collaborate for the good of account holders.
Marc Andreessen on Finance: ‘We Can Reinvent the Entire Thing’
Bloomberg interviewed venture capitalist @Marc Andreessen on cryptocurrencies, big data and the opportunity to move the financial industry forward.
“We have a chance to rebuild the system. Financial transactions are just numbers; it’s just information. You shouldn’t need 100,000 people and prime Manhattan real estate and giant data centers full of mainframe computers from the 1970s to give you the ability to do an online payment. You would not today, starting from scratch, invent any of these financial businesses in the same way.”
Can we have a financial system without banks?
@Rajesh Jayaraman takes the more extreme implications of Andreessen's hopes for the industry to their conclusion by exploring the need for banks in a more advanced financial system.
"We can now match the risk appetite of investors/savers with the riskiness of the underlying assets with technologies like marketplace (p2p) lending, liquid bond & equity markets with fully electronic trading. This obviates the need for the credit intermediation function of banks. We can also match the liquidity preference of investor/savers with the maturity & liquidity characteristcs of the underlyind assets because of a wide variety of electronically tradable securities. This obviates the need for maturity transformation."
Sorry, but Disruptive Technology WILL Kill Banks … Some of them, anyway
@JP Nicols fires back at those who think the gatekeeper model of financial services won't be upended by new entrants and continual improvements to technology.
"None of the thousands of cool FinTech doodads and thingamajigs that we are currently tracking are likely to single-handedly topple the entrenched mega-bank infrastructure, and as Chris Skinner puts it, 'There is no next big thing... get over it.' But these external changes are killing banks. At least some of them."
“Digital innovation seems to be viewed as critical to the long term growth of Chase and as a result Chase are asking their staff to stop saying 'Oh no, we’re being disrupted!!!' but to start asking 'How do we disrupt?' – a significant challenge for one of the largest banks in the world. And to do so, they’re looking to other industries for definition of the next generation of customer experience – don’t look to a bank, look to Uber, don’t look at a wealth management company, look at Starbucks.”
“Last year global private fintech companies raised nearly $3 billion, that’s more than triple the $930 million invested into fintech companies in 2008. There’s some speculation that we’re in a bubble and fintech companies are being overvalued. But I don’t think we’re in a bubble, and the valuations landscape is nuanced and young. We’re just at the beginning of innovation, and there’s immense potential for growth.
The banks are creaking under the weight of old legacy systems. They just can’t evolve fast enough alone; they need to collaborate with and buy into fintech companies in order to successfully compete in the new digital landscapes.”
Why and How Banks Collaborate with Digital and Fintech Companies
@Collin Canright illustrates why banks and fintech startups should work together to thrive in the digital age.
"What’s changing is the realization by the smart fintech firms and banks see that they need one another to thrive, if not survive. Apple, one of the long-held bank killers, and its entrance into payments with Apple Pay is held as a prime example of cooperation."