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The end of banking?


Just trying to meet my commitment for this 2019: this is the first link I have shared, so here we go with the comments.

I read Automation will be the end of banks as we know them at TechCrunch , and here goes what catches my attention:

The end of the model

First surprise is the title itself, because it is quite obvius to me. Any deployment of technology in banking has changed the model as it was known.

When I left home for my military service back in Summer 1986 (do not start counting back, I have done it for you: that is 32 years ago), my father asked me to open an account at Caja Postal de Ahorros (a domestic Spanish Savings bank linked to the Postal Public Service) because all the balance was managed in your bankbook and you could get cash at any post office (and there was one of these in almost any military station). Almost impossible to find more flexibility and a better user experience.

In these 32 years since then, have not we seen many changes that transformed banking? I’d say a few.

Are fintech hurting banks?

This is the second point that catches my attention in the text. Author says:

The established banks are focused on copying the best of what fintech has to offer. They’re moving slowly and are a solid five years behind, but their goal is to provide a just-good-enough mobile experience to ensure their customers stay with them. Banks know they don’t need to be better than the fintech companies; their advantages of scale and distribution ensure they can maintain their substantial customer base with a sufficient product.

Those advantages prevent fintech companies from truly competing against banks

It might be right, but I also can see other perspectives.

It might be that fintech (some fintech) do not want to be as banks but just to take a portion of those services that are small for the banks but are quite profitable and that did not had much attention from the banks due to their small size compared to the rest of their business.

An example: international fund transfers. A probably small servive for banks compared to others and for which they charge hugue commissions between direct commissions and adjustments in the exchange rate. For those that I know that use Revolut, that (and just that) is the reason to use it. For me, that, and just that, is the reason I started to work with Denizen that, surprisingly, is an initiative of one of the big Spanish banks that have presence in the USA: BBVA Compass.

Quite interesting this BBVA Compass strategy: what is a very small business for the bank, can become a fruitful business for a small company. Maybe some day I write about my personal experience with Denizen, that has room for improvement. But this is a different story.

So going back to the Techcrunch post: Do really startups want to compete with banks? What I see is that they want to earn money through services (and customers) that banks do not care about.

The bait

The truth is that I highlighted this paragraph:

Once automation reduces enough friction in the financial industry, banks lose their relationships with customers. They become a utility; a provider of pipes and wires that allow money to be stored and moved from place to place

Trying to use as a bait to see if some of my contacts in Linkedin wrote a comment, but I failed on that.

So here I leave my conclusion about the text: of course adoption of new technologies will change the business model. It has always happened, I do not beliefe this will change now. I see the comparison of telecom portability to “portability in banking” as a simplification that leaves out of the picture many of the variables that drive to decide to work with a bank.

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