FROM PRODUCER TO SUPPLIER AND MOVING TO A NEW SINGULARITY
Disruption on a large scale has not happened yet in the credit sector. But when it is on the horizon, banks should have at least some thoughts about how to cope with it. To overcome entropy and irrelevance, authors Larry Downes and Paul Nunes see two ways for those companies that have been disrupted by aggressive new entrants: making the switch from producer to supplier and moving to a new singularity.11 As unspectacular as the first proposition may seem, companies in entropy can shut down their retail operations and transform into suppliers for innovators.
In a sense, banks are already suppliers for marketplace lending platforms and other FinTech companies because most platforms depend heavily on banking relationships and financial networks. They use banks to hold the capital of lenders in savings accounts and to underwrite the loans.The second approach, the move towards a new singularity, is also already afoot: several banks are reaching out to early stage FinTech entrepreneurs as collaborators. They fund FinTech hackathons and global FinTech innovation centers and lend their brand recognition to FinTech innovation labs. This is a smart strategy. Keeping their future competitors close when their technology takes off is often the main motivation. When new ventures seem promising, some banks acquire startups and incorporate them into their own operations or run them as test labs. They also invest directly in new startups together with other investors and venture capitalists. By sponsoring FinTech innovation labs, banks are on the inside track as far as innovation is concerned. However, there is still one issue: are banks simply keeping their thumb on new ideas by investing and buying them up or are they truly interested to incorporate innovations into their operations? We believe they would be well advised to do the latter. In that case, we must ask whether banks are capable of making the most of the innovations they acquire.
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