Platitudes and Transformation:
Former senator Barney Frank says that in order to be transformative, we must be pragmatic and we must understand accounting. Okay! Here we go:
The World Economic Forum has just completed a detailed analysis on how vulnerable the financial services industry is to disruption from new, technology-savvy players.
The 16-month study explores the potential of new entrants and innovations on business models in financial services.
“From crypto-currencies to big data to peer-to-peer lending, fintech innovations have captured the attention and imagination of customers, investors and incumbents,” the report says.
However, the nature and extent of the impact these innovations will have on the financial services industry remains unclear.
The study identifies six areas of innovation which can disrupt financial services, as this graphic shows:
- Innovation in financial services is deliberate and predictable. Incumbent players are most likely to be attacked where the greatest sources of customer friction meet the largest profit pools.
- The biggest impact is where new players use business models which are platform based, data intensive and capital light.
- The banking sector will be the first to feel change. However, the greatest impact of disruption is likely to be in the insurance sector.
- Institutions will use parallel strategies, aggressively competing with new entrants while also leveraging assets to provide those same new entrants with infrastructure and access to services.
- Collaboration between regulators, incumbents and new entrants will be needed to understand how new innovations alter the risk profile of the industry – positively and negatively.
- Disruption will be a continuous pressure to innovate which will shape customer behaviours, business models and the long-term structure of the financial services industry.
My intent in the following series of blog posts is to transform business as usual. It is to provide a step-by-step manual which transforms investments into economic benefit for the poor. Each blog post will be entitled by a popular rock song.
The posts will use the World Economic Forum Study as the empirical basis for a prescriptive series of suggestions for the creation of a better world by conflating tried and true financial techniques with disruptive new financial technologies. In so doing I will apply 40+ years of experience as a public servant, a supply, logistics, embarkation officer, an international trade finance banker, an international sales manager, a freight forwarder and customs house broker, a college professor, a platoon commander, an international business development officer and most of all as a Christian who strives to do well by doing what is good for humanity.