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Go Fintech or go home (and don’t be Techfin)

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I’m relaxing and thinking.  A bad combination.  Just had several sessions with different conferences on Brexit, Open API’s, PSD2, Open Sourcing, Open Banking, Innovation and more … and it all seems like such drivel.  One of the sessions was asking the question: is it time to drop the curtain on innovation theatre?  Yes, for gawds sake, yes.

I have that frustrated feeling of someone who can see the devil and the deep blue sea, as he’s standing in the middle of the two and screaming LOOOOOOOKKKKKKKK!!!!!

OK, overly dramatic.  What’s the problemo, Chris?

It’s basically this: twenty years ago, we talked about disintermediation and object oriented architectures and the banks all went yes, very good, and did not do much.

Ten years ago, we screamed about the internet age and mobile impact, and the banks all went yes, very good, and did not do much.

Now, we’re all yabbering on about digital and blockchain and the banks all go yes, very good, and aren’t doing much.

What does it take guys?

I liken it to seeing a tsunami wave.  It’s two miles away or, in this case, two decades.  You can see it coming and all go, that’s a bloody big wave.  But then you go back to relaxing on the beach and playing volleyball.  Then, some time later, you look again and go oh, that wave got bigger.  But carry on playing on the beach.  Then the wave hits, smashes you to bits on the beach – like my poor dead fish who I blogged about recently – and you say ... well, nothing ... BECAUSE YOU’RE NO LONGER HERE.

This was the theme of another panel I was on that was talking about Open Banking, marketplaces, platforms, Open API’s and such like.  It was all very gentlemanly, with a dialogue around how banks are constrained by culture and leadership.  I think most bankers were stuck in the vacuum of not being able to change the bank, not being able to replace core systems and so just twiddling their thumbs and watching all these start-up marketplaces and going oh, look there’s a start-up fintech that does what we do.  Let’s watch it.

A few years later, they’re still watching it and they go oh look, that start-up has got quite big.  Interesting, and then they go back to doing what they’ve always done: whinging about legacy systems and wondering why the regulator is always on their case.

Then they look around again and say oh, that start-up is now a bit of a threat; let’s go buy it and the start-up says get lost you a-holes, I’m too big to mess with now!

This is what we’ve seen in so many other industries and surely, we’ve learned something by now.  Tower Records cannot be iTunes; Barnes & Noble cannot be Amazon; and the People’s Republic of China could not create Alibaba.  Jack Ma did.

In this world of rapid cycle change – ten years ago, no one knew what Facebook was, can you imagine? – banks that are just paying lip service to the innovation theatre are going to fail. And that is the point.  That is what the last two days of panel discussions brought home hard to me.  Banks are just talking the talk in most cases.  They’re dilly dallying with digital; they’re blustering over blockchain; they’re happy about API; and they’re learning about machine learning; but it’s all just talk.  Stop talking the talk and walk the walk guys.  Start taking this seriously and start doing something seriously about it.

After all, all these start-ups are taking it seriously and gradually moving from embryonic ideas to market dominance.  The Collinson brothers who created Stripe have just become the youngest billionaires around; PayPal is worth more than Barclays Bank; and, after their IPO, Ant Financial is valued as being worth more than FOUR Deutsche Banks.  Things are changing and they’re changing fast, and just because your CEO says we’re committed and your CIO says hey, let’s do a hackathon does not make you a Fintech leader.  You’re still just a bank.

I guess the real message is the phone call I got from a journalist asking me about the latest digital bank launch.  They said: what’s different about a digital bank to a mainstream bank with an app?  I sighed, and replied: “a mainstream bank with an app has just added the app to their old systems.  That’s why it just tells you balances and transactions.  A digital bank has been built from the ground up to use and leverage today’s internet-based technologies.  It is totally different.  Perhaps the best way to illustrate this is to think about a big bank.  They have buildings, staffers, history.  They see a new tech and they try to shoe horn that new tech into their terribly complex structure.  A start-up digital bank begins with a clean sheet of paper and asks: ‘how can we take all this tech and apply it to financial services?’

The bottom line is the difference between Fintech and Techfin.  A bank is a Techfin firm: they see technology as something to apply to existing financial market structures and processes; a start-up is a Fintech firm: they take tech and work out how to use it with financial markets and structures.  The former continues their focus upon physical distribution with buildings and humans and work out how to add the tech on top; the latter start with digital distribution of data through the internet, and then work out if they need any buildings or humans on top.  It’s a completely different view through the lens, and most banks don’t have this view because they have no one in a decision-making role who can take the gutsy decisions and realise that the emperor is wearing see-through clothes.

Oh dear.  It’s Wednesday and I’ve just had one of my regular rants. Mind you, it feels sooo much better.  Bring on Christmas.

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Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog,, 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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