Tech’s raid on the banks

www.economist.com

This week’s Economist featured what we’ve been talking about for a while - the impact of digitization on financial services and banking and how backward traditional financial services player are.

Banking’s dirty secret is that it is backward, inefficient and hidebound. Banks have formidable lobbying power, however. Wary of change, customers, politicians and unions complain when branches are closed and jobs cut—witness the recent collapse of a German mega-merger that depended on both. Regulators love dealing with a few big firms. 

The interesting nuance that the magazine rightly discusses is the how companies with major user bases can add financial services into the product mix and ‘disrupt’ traditional financial players. Incumbents, through owning the ‘pipes’, have historically been able to exert control over services. That’s no longer the case, and with more consumers now trusting technology companies more than financial institutions, FIs are under attack now more than ever, often from unexpected players.

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