A millennial may shy away from walking into a bank, but could the bank win them as a client using an online robo advisor for their managing their savings?
When citing the growth of the fintech market, its common to see indicators such as VC investments in the market referenced. However accurate these numbers are, 2014 and 2015 have continued a dramatic increase in the pace of investment. Another factor that’s often harder to quantify, is the adoption among the incumbents and established market participants in the sector but arguably its at least as indicative of a larger trend.
In the past 12 months, we’ve seen participants embrace these new models, all the way from exchanges such as Nasdaq and OTC Markets, to banks such as Goldman Sachs, JPMorgan, BBVA, these established companies are rolling out their own agendas and plans in financial technology, from leveraging blockchain to deploying open APIs and competing head on in the p2p lending marketplace.
Now, while these initiatives are relatively new and nascent, this signals a wider theme in the global market, that is of market legitimacy. The market has developed far enough, that it may be seen as riskier to not act on the market, than to act on it. Perceived risk is subjective, but it is telling in that it shows the extent of demand from the market for consuming services such as banking in a new way. Robo advisory services, for exampled as deployed by Charles Schwab, are a poignant example of providing an existing service in a more modern way.
This comes at a while of a large technology overhaul within various financial services organizations, where we've had the pleasure of various conversations. An example of which was a recent discussion with a system administrator within a large banking conglomerate who had been brought in to oversee the winding down of existing legacy infrastructure. It was to be a few year project and now eight years later, its still a few year project. That being said, this trend is unmistakeable across the board and sooner or later, it will get completed either smoothly or more likely, through a series of at times critical system failures.
Now, let's give you a few anecdotes from recent conversations that illustrate the state of affairs in evaluating this new market. A private bank CEO publicly conveyed the message, that they expect this period of fintech to be the biggest existential threat and an immense measure of survivorship in the banks history. They further added that they believe that only a fraction of the revenue generating business in ten years exists today. Think about that for a second, they expect the core banking services as defined today to make up a minority of their future revenue as a bank.
Another anecdote comes from a technical lead from a large financial services institution, in their lending department. In the process of getting details of how their collateralized business debt marketplace should function (the configuration process), our team lead asked whether we could piggy bank on the existing infrastructure for business information as it already exists. They are in fact a prominent lender and the client data they hold is remarkable. Her answer; the existing infrastructure is the last place they would look. With hundreds of legacy Windows 2003 servers haunting in the background, there was literally no way it would be a good use of anyones time.
This paints an interesting picture, one of large scale adoption and validity in the market that is met with the realities of existing infrastructure and its limitations. Navigating these types of particularities is a crucial part of the adoption process and through our work with our clients we have been fortunate to be able to assist in the creation of new ways of delivering services for the modern consumers. The trend and direction is clear, markets always move toward the greatest efficiency. The same is true in financial services. How else is the gap between the suit and tie wealth management banker and the millennial that doesn’t want to speak to a person going to be bridged?
About the author - Markus Lampinen
Internationally awarded digital finance entrepreneur, active in pioneering new securities models worldwide. Has worked in digital finance since 2009, recruited over 100 individuals, built up a operations on six continents and been recognized as one of the top 100 thought leaders in crowdfunding. Markus has pioneered new funding models in the US and Europe, advised policy makers worldwide - including the SEC, the European Commission and Italian regulator CONSOB - for more effective markets, and worked with visionary organizations such as the World Bank and the Kauffman Foundation to improve frameworks for digital finance. Markus has studied computer science and economics (M.Sc).
Internationally awarded digital finance entrepreneur, active in pioneering new securities models worldwide. Has worked in digital finance since 2009, recruited over 100 individuals, built up a operations on six continents and been recognized as one of the top 100 thought leaders in crowdfunding. Markus has pioneered new funding models in the US and Europe, advised policy makers worldwide - including the SEC, the European Commission and Italian regulator CONSOB - for more effective markets, and worked with visionary organizations such as the World Bank and the Kauffman Foundation to improve frameworks for digital finance. Markus has studied computer science and economics (M.Sc).
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