Can Industries Avoid Technology Disruption?
History doesn’t repeat itself, but it sure does rhyme, so let’s take a quick stroll through memory lane.
Over the last 50 years or so, the music industry has been reimagined by technology. As technology continues to grow, tools become available to more and more people. Technology stepped in and allowed individual artists to record, produce, and distribute their products themselves, giving artists freedom, subverting the archaic corporate model. This effect is commonly referred to as disruption, and the music industry is an early example.
Twenty years ago, in order to reach a national audience, a musician was forced to sell their music to large corporations. Traditional industry titans were the only entities with the infrastructure and resources to provide mass replication and distribution.
The negative side effects of this system were numerous. The market developed a form of censorship, the large audience only heard what the executives chose to finance. In other cases, changes are made to the art in an attempt to raise profit margins. There was total corporate control of individual creativity. Then, revolution ensued. The industry was a certain way, when something happened that forever changed it. The catalyst for this change was the increased availability of technology and the internet.
Technology is shifting the power from corporate board rooms back to the hands of the creators and innovators, and traditional banking is not immune to this effect either. In fact, it is becoming rapidly more apparent. Technology is now increasingly applied to financial services in an effort to provide innovative solutions to modern financial demands.
An early example of this phenomenon: online crowd funding. This is an example of young tech-savvy people using technology to disrupt the traditional banking matrix.
Allowing small businesses to gain access to capital without having to leash themselves to a large institution or wading through miles of bureaucracy. This gives the business owners freedom to conduct and grow their businesses on their own terms.
Another early example of innovative technology that filled a gap in financial services was PayPal.
Traditional banks did not effectively embrace online transactions even as they became a more regular part of life. Early innovators realized there was room for improvement in how money was transferred. The result was one of the first tech companies that provided a solution for a specific financial need. PayPal now provides secure transactions with no middlemen, credit checks, or unnecessary overhead. This particular application of technology handles billions in transactions annually for people around the world. Big banks were asleep at the wheel, allowing Paypal to take the lead.
Technology will continue to march into the future. The exponential advancement of processing power will be mirrored in the growth of innovative solutions to modern problems. Tech companies will continue to cannibalize traditional industry giants — service by service.
Big banks appear to only have two options, adapt to the reshaped landscape or be washed away in the tide of progress.
Check us out at www.banknovo.com