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June 30, 2011


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Brett King


Am I detecting that you are softening your view in respect to disruption in the retail banking space?

I don't think the challenger to banks are telcos. I think the challengers to banks today are in fact handset manufacturers and their App stores. Today a bank needs permission from Google Market or Apple iTunes to publish their App and allow customers to access mobile banking. Who would have thought a few years ago that a bank would need to ask Apple for permission to allow their customers to access mobile banking? Who would have thought mobile banking would be fast becoming the dominant day-to-day access channel?

The thing that is abundantly clear is that actually no one will be able to dominate in the future, and that banks need to be very open to working with external partners, platforms and new technologies as they emerge. The view that if you want banking you go the "the bank" is already dead in my opinion. We're just seeing an industry in the throes of adapting to a much more distributed environment.

The challenge with this is that existing organization structures, P&L, technology platform, risk and compliance policies all will be heavily impacted as these changes occur.

The challenge is not competing with Telcos. The challenge is staying relevant as day-to-day interactions with banks change.

Banking in the future will be something you do, not a place you go.



I agree with Brett, I think banks are in real trouble here and unless they start to keep up with the current digital financial marketplace they are in for some tough times in the future.

Gentleman Nosh

Having worked in both the Telco industry for several years and now working in the Banking industry, I don't agree with the above article.

Yes the banks are going to fight for their business, but the Telco's, currently having their core value add revenues squeezed by app stores - Apple/Google/Amazon/Nokia/etc, are desperate to partner with organisations that will enable them to take mobile payments. Paypal is fighting for this business tooth and nail, and as you have stated is far from the only option.

The banks aren't in a position to do this:
- long development time-frames
- Deeply entrenched business models
- Lack of ability to implement dynamic ideas

Seriously... there are still numerous banks unable to allow their customers to change their PIN's at an ATM.

Imagine if I was given access to a home loan at the lowest margin and best market rates that my lender could source from around the world, would I refuse to take it up because it was provided by bitcoin, or paypal, etc, etc? I'd be there in a flash if it saved me $5k a month on my mortgages.

I bet I'm not the only one with no love lost on my current banker.

Only those capable of the most rapid change will survive into the decade without ending up as simply a dumb pipe, and that's not an idea that I have ever heard ascribed to a bank.

Chris Skinner

Interesting points raised by y'all but you do not address a fundamental point: banks have not been disrupted in the past, even though we all thought they would be.

Historically, this is because the banking licence protects the industry. That licence has been eroded - vis-a-vis my point about transactions - but is still in play.

This is why nothing has displaced core banking in the past and, although I agree with you Brett re banking is not a place you go, the ability to hold and move funds is still in that banking domain and hence is still the key to how we exchange value.

Whilst fund holding is protected by licence, banks still have a core position.

However, that position is changing as others eat into the core, e.g. mobile firms with transactions, which leaves banks as potential 'dumb pipes'.

This is why the point of my piece here is that banks that recognise that threat - the 'dumb pipe' threat - are building the transaction PLUS.

They are focusing upon the value add of the complete experience, not just the transaction.

As I say: "For banks that understand this, they are creating stickiness elsewhere in the system. For banks that don’t understand this … goodbye."

You don't agree?


(Many) banks should become "dumb pipes" - this is where their competitive advantage lies and by focusing on this they could optimize their services, gain economies of scale, reduce complexity (and costs) and optimize their capital structure. Just because "dumb pipes" aren't as sexy as the customer UX at the top of the stack doesn't mean they can't be a good business. The banks fail miserably by trying too hard to play all layers of the financial stack which forces them to have incompatible cultures, cap structures, skills in a sub-optimal "all-in-one" package. Why? Short version: management types generally prefer running bigger and "sexier" businesses and care more about this / their "position" than the outcomes... iow few volunteers to put their hands up and run a well-oiled, profitable, focused collection of pipes. Especially if the jargon calls them "dumb" (which quite frankly is irrelevant)

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