A story about a bank

I read this article today in the CB insights newsletter. Rather than just linking to it directly, I thought it was worth pulling out into its own blog post, as it’s in three parts and this may make it easier to read. So the article is below, almost in full.

My only comment here, is that like some venture capital firms, the banks really need to find new business models. In addition, with the new open banking standards coming into play, the profit margins where commercial banks make money is slowly being eroded.

The morale of the story in the book “Who Moved My Cheese” looks at the need for change. Banks have been around for a long time, so change isn’t something that will come easily. But it is coming…

Who Moved My Cheese — timely reading for the big banks?
Sand. Meet head.
The invincible bank
The story we’re going to tell is of a bank named Barclays.
Barclays is a proper British bank.
According to Jes Staley, its CEO, Barclays will always be around.
Like forever.
He doesn’t think fintech companies are going to challenge Barclays.
These fintech companies don’t recognize that 30% of Britain’s GDP runs through Barclays.
In big companies, sometimes you run into this Barclays attitude.
It goes by many names.
Hubris.
Arrogance.
Cluelessness.
It’s also worth understanding that there is no upside to saying stuff like this.
Cuz more often than not, you’ll find yourself on the wrong side of history like so many of these CEOs.
And then we’ll make slides to immortalize your cluelessness.
Slides like this.
That worked out well, eh?
It’s harder than ever to stay on top.
Just look at the data.
The arrogance is surprising especially given Barclays’ stock performance.
In any case, more than ever, incumbents need to at least recognize that threats from insurgents can be real.
(probably not as publicly as Santander)
And many do. Especially in financial services.
Of course, there will always be folks like Jes Staley at Barclays who don’t.

Sign up to the CB insights newsletter here.


The other side

Interestingly, this week Barclays also launched a new fintech hub, Rise London in Shoreditch, taking them to seven campuses globally. Jes Staley was quoted in City A.M. saying:

We believe that technology must be a core competency of a global financial institution, and we intend to be a leader in the industry. Last week we announced the creation of 750 new jobs in our UK technology centres.
Fintech startups are at the front of the technology wave that is changing our industry. Through Rise, we glean important insights; we can actively experiment with emerging technologies, and we can spot early trends and new markets as they form. This allows our employees, customers and clients to do things faster, better and at lower cost.

Barclays clearly aren’t ignoring fintech, and whether they are really trying to help fintech startups, or just planning to get as close as possibly to any potential disruption, it’s a smart move.

Final thoughts

Like Transferwise, other fintech companies are looking at taking parts of the banking system where the margins are unnecessarily high, and building a great experience for for customers at great value.

Lending, credit cards, and penalty charges and fees, are key areas where banks make money — these are all ripe for disruption.

It’s already started.

But still we depend on the banks being the only safe place to put our money with a government backed guarantee. It’s hard to see this need disappearing. It’s also great to see the new banks, like Monzo, Tide, Atom, Starling and Metro, but the question I believe that still needs to be answered is: How will these banks make money when the easy margins are all removed, and the costly overheads and infrastructure remain?

Or, will tech behemoths like Amazon, Apple and Facebook become more intertwined with our spending habits?

It’s yet to be seen if Barclays will be the Blockbuster or the Apple of banking, but they’ve certainly got an opportunity, and with the likes of initiatives like Rise, someone has taken their head out of the sand.


Colin Hewitt is fascinated by startups, the future banking, and finance. He’s the CEO and co-founder of Float. Based in Edinburgh, Scotland.