Incentivising purpose in banking, gig economy and insurtech, banking revolution, American banking — FinTech Summary 81
The revolution that fintech has started has a significant impact on the way we will live our lives. From how we pay for our coffee to what kind of retirement we will get. However, these are only the first-order consequences of fintech revolution. There will, surely, be the second and third order of consequences. For example, the way we transact will eventually impact the way we hire sales staff, which in turn will impact how we structure our companies and how we allocate capital. These changes are still hard to predict but something we need to start thinking about.
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By Anne Leslie-Bini
“I want to create a lender that people don’t hate” said Denise Kingsmill, the chair of the board at U.K. challenger bank Monzo. Now there’s a pithy declaration that speaks volumes about the state of the banking industry and the times we live in. But how should we read this: are her comments simply savvy market positioning, tapping into the desiderata of a disillusioned digital generation? Or could this be something of greater substance: a refreshingly wholesome approach to rehabilitate an industry that historically ran on trust and bankrupted itself of its own currency during the global financial crisis? But here is the rub: even if challenger banks turn out to be ‘better’ banks from a customer experience perspective, is this enough? Can’t we, and shouldn’t we, expect more from the ‘banks of the future’?
Next up in insurtech: the gig economy
By Diana Asatryan
The Ubers and TaskRabbits of the world fueled the creation of a whole new layer of the labor market, which now spans across (arguably) every imaginable industry. Just like with every new industry, the gig economy is now in need of products and services, designed specifically for its unique market. Finance and insurance products, are, of course, on top of that list. Already, many FIs have jumped on the gig bandwagon; GreenDot, for example, partnered with Uber and Mastercard last year to offer instant pay for on demand workers. Both insurtech and the freelance market have been on an upward curve lately. The CNBC estimated recently that over the past 20 years, the number of gig economy workers has increased by 27% more than regular payroll employees. In the meanwhile, reports suggest that between 2011 and 2017, VC funding for insurtech companies grew 31% annually. The two industries seem to be a match, made in fintech heaven.
The banking revolution: sink or swim
By Chris Skinner
Wave after wave of technology hits the bank, and the bank absorbs each wave and internalises the change. The issue is that, just like the fish, each wave is getting stronger. As digital transformation sweeps through the industry, the bank can resist each wave or swim to deeper waters. The banks that resist the digital waves are those who have millions of customers, billions of capital and centuries of history. The bank does not need to change so fast. The bank is robust, secure and resilient. The question today has to be: is it? As the digital waves hit, they are transforming the bank. Now, with open sourcing structures, billions of dollars are being invested in companies to transform the whole nature of finance. FinTech firms are reinventing the markets whilst cloud, AI and distributed ledgers are reinventing the back office. Through apps, APIs and analytics the bank is being open sourced. Without fundamental technology change and technology leadership, the bank is behaving like the fish by the shore. Wave after wave after wave of demand for technology change and digital transformation is hitting the bank, and the bank is just continuing to feed on past customer revenues, products and services.
America is Falling Behind in Banking Innovation
By Jim Marous
Despite increased investment, the banking industry in the U.S. continues to lag other regions of the world in the development of meaningful digital innovation. This impacts customer experience, cost structures, as well as revenue opportunities. Historically, the banking industry in the U.S. has been slow to innovate compared to other industries. When asked why this may be, most industry studies found legacy back office infrastructures, the lack of leadership commitment (culture), regulations and compliance, organizational silos and the lack of budget to be inhibitors. Despite these limitations, the U.S. banking industry has tried to increase their focus on innovation through upper management commitment and support of innovation initiatives, development of innovation labs, increases in dedicated financing, and even an openness to invest in, or partner with, fintech firms. Some may question if the increased level of attention has had any measurable impact.
Originally published at FinTech Summary.