The end of technology…
The future of banking is not about being a technology company, why?
It’s hard today to go to an industry conference that isn’t called <insert industry> “tech”, like Fintech, Biotech or Proptech. Apparently, the culprit is Marc Andreessen whose paper “software is eating the world” proclaimed that every company had to be a Technology company.
Well before the rise of the internet, we had technology but to run most businesses you needed an office or shop. Companies grew around their customer bases and where they could get most bang for buck when it came to hiring the best talent. However, during this industrial age, no one wrote a paper that said we should be construction companies. Before that any commerce relied upon mainly people and you guessed it, business didn’t require you to be a midwife.
The benefit of having a few grey hairs is that before dementia sets in, you can call out the false prophets – those that said…. Mobile First, Digital First, after years of hype. It’s time to stop thinking that disruption will replace the legacy businesses as Expedia didn’t kill travel companies, Amazon hasn’t killed retailers and Uber won’t replace all taxis. Therefore, I think it’s back to basics.
In banking, competing on cost income ratios will drive banking into providing commodity products on thin margins that require scale and volume to make their business tenable. Those wanting to follow this route will need to compete with players like Ant Financial that have already scaled their platform’s 10 times larger than Visa and Mastercard when it comes to payments.
In the distribution space, headline rates or better banking user experiences (UX) are similarly not sustainable without a grander plan that goes beyond banking products/services. What will last in this space is a deep focus on meeting unfilled needs of specific customer segments providing end-to-end products and services that address those unfilled needs better than is possible through traditional or digital banks today.
Hence the future of any business will be determined by their deep understanding of market or customer needs and addressing them as effectively as possible. Yes, you may leverage new technology to do this and you will need to enter the battlefield for the best talent. However, the disruptors will have a strong vision with a well thought-out and tested strategy. For me this is the real difference between digitising an existing business and true business transformation that leads to becoming a disruptor though I should use the latest buzz terminology – being an impact investor.
I’m not seeking to put out the fire in the bellies of start-ups or corporate entrepreneurs. It is definitely the most exciting time in technology and banking that I have experienced in the last 30+ years. I do believe we aren’t in a bubble like the dot com incident, but without a strong customer proposition and path to profitability many start-ups are doomed to fail. In the corporate world investing in innovation and technology without a clear end goal is more of a danger than whether a start-up or tech company is going to eat your business.
No industry is safe, whether you are a software company, bank or real estate company. Of course, technology is changing them all, but pick your battles wisely, maybe let the tech companies provide the technology and you focus 101% on your business and target customers. Why be a tech company with a banking licence rather than being a great bank that leverages the best available tech?
I’m just saying is that it’s time to drop the words “digital” and “tech” and realise these things are really business as usual part of running a business…
Dharmesh Mistry has been in banking for 30 years and has been at the forefront of banking technology and innovation. From the very first internet and mobile banking apps to artificial intelligence (AI) and virtual reality (VR).
He has been on both sides of the fence and he’s not afraid to share his opinions.
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