The enemy within
I keep seeing tweets about ‘fintech transforming the world’… and articles on ‘fintech eating the world’… and keynotes on how fintech is the death knell for traditional banks and whatnot.
We saw and heard and thought and feared (or hoped for) those things at the dawn of the fintech era… and then… it just didn’t quite happen.
A few people made a lot of money.
A lot of people made a lot of noise.
A few things changed dramatically.
A lot of things evolved slowly and deliberately.
But traditional banks are still here, and largely unchanged. And fintech is also very much still here but hasn’t eaten much of anything other than a lot of VC cash.
Do I mean fintech was not a force to be reckoned with? Not at all.
I mean that we had it all wrong.
We said ‘fintech’ and meant ‘this new stuff start-ups do’. We largely actually meant start-ups. Really.
But the last 15 years have shown that ‘fintech’ isn’t a single thing and that start-ups are just a small part of it.
If anything, entrepreneurship (not start-ups) is the bigger story and, even then, that is only a small part of the change we are trying to size. Dynamism is the bigger story and even then, not the whole story.
The whole story is a paradigm shift from analogue to digital. It’s not a small set of things we use that is shifting but rather the way societies live that has changed.
We have now learned that digitisation is not a phenomenon that smaller companies have all sown up. We have learned that fintech did not bring in its wake a set of new tools but rather was part and parcel of a transformation so deep as to encompass our entire social fabric globally.
We have learned that ‘digital’ isn’t a choice banks get to make in their own time or the privileged domain of start-up founders in hoodies. We have learned that we are part of a bigger thing, rather than this thing being a factor to be reckoned with in our domain.
The power dynamic is reversed and the proportions are all out of whack compared to what we thought was happening.
We have learned all that.
And we have learned that banking is transforming all right, but not in a way that is straightforwardly about winners and losers.
And right now, with the tech industry going through round after round of redundancies and with funding drying up, valuations imploding and some of our shiniest unicorns falling into rough times… now that some of the ‘ones to watch’ have handed back their licenses and closed their doors… not in droves, but also in enough numbers to prove inexorably that there is a shift… now that we know all these things…
I still see ‘fintech is eating the world’ or neos vs big tech… winner-takes-all bingo territory… on the decks of well-known influencers and well-paid consultants.
And I know… I know… that the narrative keeps their livelihood intact. I know that. And I also know that the pace at which the world is changing isn’t charitable to the slow learner or to those who feel that the world will wait till they are ready… so the message being repeated again and again is needed and therefore inevitable in some ways. I know it’s also hard to shift mental models. You can accept a different answer but asking a different question is a whole new ballgame.
I know all that… and still, I can’t help but wonder… what are people smoking?
I was there when ‘disintermediation’ was the bogeyman and banks were terrified fintechs would come into the world as we know it and take the best bits. And by best, we meant ‘most profitable’.
I know saying that I was there at the dawn of fintech is tantamount to admitting that I had Teenage Mutant Ninja Turtle pyjamas or a lambada skirt. I had both and, frankly, being older doesn’t mean you’ve seen it all before. But it does mean that you have seen some of it before. And I have definitely seen the posturing and the rhetoric before. Only last time we had reason to believe it. Reasons that didn’t hold, perhaps. But that you don’t know till after the fact. Which is now. Now is after the fact. Now we know better.
It turned out disintermediation was the wrong thing to be afraid of. As were start-ups.
That’s not where the challenge would come from and frankly, I suspect banks now kinda wish that had been the worst of it. Hindsight and all.
We were so caught up with worrying who would do this to us, where the threat would come from and what we could do to slow them down, trip them up or buy them out… so caught up in looking for the potential perpetrator of this thing that we missed the signs about what was going to be done to us.
And while we were looking at start-ups thinking we were looking at fintech, the economy around us digitised. The world became hyperconnected. New skills, a new consciousness, new legislation and new economic models emerged in tandem all around us. And this change demands new things from us as customers, regulators and suppliers move faster than the financial services industry.
And this change came at us from all directions.
Replete with opportunity, for sure. But not just opportunity.
Disintermediation didn’t quite happen. What happened is that financial services institutions are now looking at a brave new world of digitally distributed services and products, data-driven services, real-time services and ‘truth-sharing’ when it comes to cleared balances, interest accruals and so on and so forth, while also carrying the cost to serve of all the legacy architecture in their estate.
Unit economics don’t quite wash if you have to price for a digital product while spending on both the digital architecture and all the estate of times gone by… since it’s still there… limping along.
And yet here we are. Still looking at neos… and big tech… trying to work out who is the biggest threat. When we should know by now that the enemy is within because the world without is so transformed that the stuff we carry inside our organisations is the greatest threat to survival. Because it slows us down. Because it weighs us down. Because it bogs us down.
It turned out disintermediation was the wrong thing to be afraid of.
Unit economics was the bogeyman we should have been losing sleep over.
So it’s not fintech that’s eating the world. It’s not big tech that’s eating our lunch.
The world is not being eaten at all. It’s your margin that’s being devoured. And it’s not fintech or big tech doing it to you… it’s not start-ups or tech giants… it’s the legacy estate and its heavy-heavy footprint in a world that moves fast, costs less and treads lightly.
If you must appoint blame, if you must find who is doing this to you, then sadly the answer is… yourself.
Leda Glyptis is FinTech Futures’ resident thought provocateur – she leads, writes on, lives and breathes transformation and digital disruption.
She is a recovering banker, lapsed academic and long-term resident of the banking ecosystem. She is chief client officer at 10x Future Technologies.
Leda is also a published author – her first book, Bankers Like Us: Dispatches from an Industry in Transition, is available to order here.
All opinions are her own. You can’t have them – but you are welcome to debate and comment!