It was a pleasure to take part in the Verdict Harnessing Fintech in Retail Banking conference earlier this month, where I outlined my three pillars for the future of finance. The response from the crowd, composed mostly of bankers, was much warmer than I’d expected.
It’s great to see established banks embracing fintech companies and looking to them as collaborators rather than purely as competition – but more on that later. I was asked if I would outline the presentation and share it, so that’s exactly what I’ll do.
Here are the three pillars discussed at the event.
Why is it that banks seem to offer their more valuable customers investment opportunities that have higher potential returns? After all, those with less money would be more likely to benefit from those higher returns than those who have already accumulated wealth.
The obvious answer is that banks offer these higher returning products to wealthier clients because they need those clients to stay, so that their savings can be used to to make the bank money. Yes, I’m oversimplifying the reasons, but ultimately people want choice; they want to know what is available to them and to feel as if they are part of the decision-making.
Crowdfunding has done a great job of exposing these investors to other products, to early-stage investments, to direct SME and personal loans, to invoice financing, to IPOs and share placements, and to a number of other assets that were once invested in solely by banks behind closed doors.
For the banks of today, the answer to staying on top is in offering investors more choice, more options, more access.
Where does the money you put into the bank go? Most people at the bank probably don’t know, let alone those doing the depositing.
The bank is a bit of a black box: money is used to create more money through lending, then lending again, and again, and… you get my point. Where your savings ultimately go is a mystery – you could be supporting a local shop or a weapons manufacturer, and you have no say in it.
Banks of the future need to provide this transparency, and they need to provide choice to investors so they can help decide where the money ends up. This is not a new notion; co-ops and credit unions were built on similar principles. P2P lending platforms give investors this choice and they will continue to grow until the banks can offer something similar.
No investor should receive better terms or rights than others just because they can afford to invest more. Once you’ve got access and transparency in place, equality must come next. Need I say more?
These are the fundamentals I believe are necessary in building the financial ecosystem of the future.