THE ALTERNATIVE TO THE HYBRID FINANCIAL SECTOR: A DOOMSDAY SCENARIO FOR ESTABLISHED BANKS?
The hybrid financial sector is far from a foregone conclusion. It might well be possible that banks and FinTech companies continue on their separate trajectories; with each slowly eroding the other’s market share by competing on margin, and fragmenting the market more and more.
As we mentioned earlier, one danger with FinTech startups is that hardly any new entrants gain market share on the small business lending operations of established banks. Several market leaders providing unbundled digital financial services, joining forces on a new kind of banking platform, and offering services to customers identical to those they receive from banks— only much more transparent and affordable—would be a real game changer. Imagine online lenders, digital payment providers and wallets, online wealth managers, online brokers and trading platforms, crowd funding platforms, and digital currencies converging on one single platform where a customer could mix and match her own bank as if the different services were Lego bricks.Banks should be part of such a modular banking platform as well—in fact, they could play a major part in it. The only antidote against irrelevance for banks is to become a part of the new hybrid financial system, both as an organizer of the platform and as a service provider in their own right. By opening their services and financial networks for new players in a fair and transparent way, banks would bring their strongest assets to the table. They would shape the future of the financial system together with new players. It is by no means a secret that to do this, a bank would have to think more like a startup itself. We discussed how banks can do this at length in Chapter 15. In Chapter 17, we will now look at Unified Analytics, which could be one starting point for banks to become part of the hybrid financial sector.
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