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Banks and disintermediation, Part Two

Building on yesterday’s theme, I struggle when people (including myself, I must admit) shout out that banks are going to be disintermediated, I struggle when someone starts shouting out that Google, Facebook or Amazon will replace banks. 

I struggle even more when rebels state that bitcoin is the future and down with the capitalists.

Maybe I’m too old or too jaded or just too darned cynical, as I’ve heard it all before.

Twenty years ago, everyone shouted that banks would be disintermediated.  Everyone said that Microsoft, Virgin and Wal*Mart would take over.  Everyone pointed at Beenz and Flooz as the new forms of money.

None of it happened.

Maybe it never will.

It is why I now talk about component-based banking, because I do believe the banking business model will change.  But will banks disappear?  No.  They will adapt.

Banks will evolve to become integrators of the best bits of software out there.

They will find the APIs, apps and cloud-based data needed to integrate services into the best-of-breed components that suit the customer best.

This will be in partnerships that create a complex ecosystem similar to the complex ecosystems we see out there for social media …

Facebook ecosystem

… and digital value exchange …

Bitcoin ecosystem

 In other words, the business model is far more complex than it has ever been before, and will continue to gain complexity, but it is the financial firms that find simplicity in complexity that will prosper.

Meanwhile, as I struggle to accept that new players will disintermediate banks, I do believe that they will augment banking.

This is the point I was making yesterday when talking about Google. 

Google, Facebook, Amazon and Bitcoin will end up as part of the new complex business model of component-based banking.

Banks will evolve to work out how they can find relevance to their end target audience though these intermediaries.

In other words, rather than being disintermediated, banks will identify new models for re-intermediation in a much more complex value chain.

This will be interesting to watch.


About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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  • David Brear

    Chris i’m one of the people who use this term incorrectly and while I’m not the best user of the english language (Yorkshire man born…) i think the intent is right albeit the wrong word!
    In economics, disintermediation is the removal of intermediaries in a supply chain, or “cutting out the middlemen”. What we really mean when we say that banks will be disintermediated is completely the opposite of this that banks role through technology reducing the barriers to entry particularly in the front end where the customer engagement is taking place means that there will be more people in the chain.
    The lateral example i use here is what aggregators have done in the insurance space. People didnt know they needed it, the internet provided a scalable oppourtunitity and with enough marketing spend from a standing start they are now very large companies that have taken some of the revenue from the insurance companies and fundamentally altered the model in that industry.
    The impact that Google, but more so for me Apple, could have in banking is exponentially larger than what aggregators have had in insurance. Aggregators manage the customer experience at the front end but hand over the customer and their data importantly. There is the potential that technology providers could not do this in a model that sees someone as the service injection for payments, added value services and day to day spending banking.
    For me this is where the exciting battle will commence as unlike the aggregators who started from square 1 some of the technology and retailers might already be closing in on their king 🙂

  • More than ever, banks need their CTO and CIO community to be embracing the opportunity that solving this complexity can bring.