Page 2 - May 2018 Disruption Report Flip Book

THE DISRUPTION REPORT
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To quote Bill Gates again from 1994-95, “we need banking, not banks.” The future of finance is an increasingly converged ecosystem where consumer and small and medium enterprise (SME) financial services are provided by banks and by platform companies with roots in e-commerce/ social media. So how do incumbent banks stay relevant? They have to become faster. They have to become smarter. They have to become more efficient.
Staying relevant will require an ongoing transformation of the incumbent bank’s existing business model, organizational structure, culture, and technology infrastructure. Among other factors, the banks’ strategic game plan will have to include the greater use of artificial intelligence (AI) and automation and the related overhaul of Core Banking systems and increased adoption of Cloud- based services.
...When bankers worry about the future, the fear is BigTech, not FinTech. The old question was, will banks become innovative before the new entrants (FinTechs) get scale. A decade after the Great Financial Crisis, banks struggle with innovation and speed. But they can try and “buy innovation” via partnering or acquiring new entrants. And banks can buy innovation faster than FinTechs can acquire new clients.
But when the new entrant is a BigTech, the equation changes: it comes with preexisting scale and client reach, sometimes greater than the banks themselves. BigTech [create]... revenue and cost challenges..., directly and indirectly, for incumbent banks.
The Internet-based platform companies—such as Amazon, Alibaba, Facebook or Tencent—have captured an ever-increasing share of consumers’ time and attention. These platform companies view payments and financial services not as an end in itself but as a tool to further enhance
client stickiness, and they monetize via advertising, e-commerce, or other services (such as AWS). And when these platform companies have gone into payments and finance, mainly in emerging markets so far, they have gone big. ... [For example,] these Chinese BigTech firms have established a comprehensive multi-licensed financial ecosystem, including a payments interface, wealth management products, consumer finance, and insurance products, among others.
“We need banking, not banks.” Bill Gates
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