I had this chat with a banking friend, and realised when he used the word disruption for the eighth time that this is the word of the year.
Last year it was sanctions, this year it’s disruption.
Everyone’s talking about disruption and yet, I don’t see this as disruption in the sense that most are using the term.
As I’ve blogged before, I see a fintech bubble, a lot of fintech start-ups, a lot of great ideas and a lot of noise, but I haven’t seen a single breakthrough company so far.
In fact, if any company gets anywhere near a breakthrough, I reckon they will be acquired or smashed and, again, I contend that disruption is the wrong word.
The reason it is the wrong word is that it has an implicit underlying theme that the disruption will see the destruction of the banks, as we know them.
Instead, I see new business models, new ways of doing business, new opportunities to do things different, new technological concepts such as the blockchain, new things.
I also see disruption, but more from inside than outside the industry.
Disruption means fundamental challenge. Disruption demands transformation. Disruption means that banks are broken and need to be changed.
I see that all of this is true, so how come I don’t call it disruption?
I guess it is because I don’t see the banks responding to this as disruption.
What I see is that banks are evolving and, over time, transforming. Banks are making incremental changes and, over time, these changes are fundamental. Bank are changing and, over time, that change will be radical.
So banks are being disrupted but more from within, through rearchitecting their business models and structures, than from without.
Banks are being re-architected by new business models, new ways of doing business, new opportunities to do things different and new technological concepts.
As I’ve described it before, banks are moving to component based models. Banks are moving to partnership based models. Banks are turning their legacy structures designed for the physical distribution of paper through a localised network into a digital structure that can support the digital distribution of data through a globalised network.
That is the disruption, but it’s not a disruption.
Disruption is the wrong word. It’s a rearchitecting of the model.
The model is broken. The model was built for the wrong structure – paper. The model is being redesigned for data. That is an evolution of the model. That is a fundamental change, but it is a change the banks are more than capable of managing, and they are.
Banks are rearchitecting their business, their models and their structures to be far more focused upon digital.
And this is where it gets interesting: digital at the core. It’s what I bang on about all the time: banks need to design for digital at the core. Banks need to have digital foundations that are IP-enabled, and then add on their access forms to that digital core.
This is the massive change ahead, and the rearchitecting of banks to be digital at their core is the journey we are all taking. It’s not a disruption, but it is a fundamental change, so can we stop talking about disruption and start talking about new architectures please?
Just a thought.
Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.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...