Page 20 - May 2018 Disruption Report Flip Book

DIGITAL BANK
JANMUAAYRY20210818
trading, we’re very good at risk management, we’re very good at digital distribution. ...This has moved into our wheelhouse and we’re taking advantage of it now. ...We also have a balance
sheet. Unlike the normal disruptors of markets in Silicon Valley, we’re a licensed bank holding company. We can take deposits and lend them out. The other bank holding companies, namely
our competitors who’ve have been in the consumer business for a long time, are a bit of a victim because of their legacy businesses. They have big credit card balances and are charging anywhere between 16% and 22% for those. They’re not really dying to refinance those credit card balances with consumer loans at an 800 to 1000 basis points lower cost. We’re in kind of a unique position here—big balance sheet bank, skilled at digital distribution, no legacy businesses that conflict
with our creating a consumer business for 2018.” (Crowdfund Insider, JD Alois, 04/18/18; Financial Times, Laura Noonan and Patrick Jenkins, 05/14/18; Tearsheet, Tanaya Macheel, 04/17/18)
What is the future of the financial services industry?
In a YouTube interview, NYU marketing professor Scott Galloway asked NYU finance professor
David Yermack about the future of the financial services industry:
Galloway: Even if crypto and Bitcoin isn’t the success tangibly that we think it might be, isn’t it likely we’re going to see a major erosion in value among traditional financial services firms just because of the threat?
Yermack: Yes. The blockchain technology makes many of the people who work in these organizations unnecessary. Blockchains are a real breakthrough in record keeping. They are self auditing ledger. So anyone whose job is keeping track of things— this would be most auditors most bankers the people at the Clearing House on the stock exchange— I think those jobs won’t exist a generation from now.
Galloway: So are you bearish on financial services it from a valuation standpoint?
Yermack: I would not be going “long” these firms unless you think that they will magically transition themselves into new modern organizations. But given the regulations they face that seems very unlikely.
Galloway: Does anyone stand out as being really aggressive? I mean they’re smart people with a lot of capital. Someone told me Bank of America was turning into you know a tech front—that they are making huge investments.
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