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What's next for banking?

July 17, 2015

Crowdfunding one example of unbundling

Crowdfunding one example of unbundling

I have enjoyed Mosaic Ventures view on the unbundling of the banks. Their observation that it is not a new bank that we need but a new way of banking. There is in my view an inevitability to the arrival of a new ecosystem, as our world evolves that will serve us even better. But to do so we have to have fundamental redesign of what a businesses looks like. Mostly its design is distributed, networked and peer to peer.

If we take Crowdfunding and peer to peer lending as one example, Toby Coppel writes,

In Europe, the regulatory environment is arguably more friendly for new entrants than in the US, and there are startups successfully attacking the banks at scale in lending (Funding Circle, Prét d’Union, Ratesetter, Zopa) and international FX transfers (TransferWise, World Remit). Other areas that provide sizeable profits to the banks are in the early phase of startup development, such as equity financing (Angellist, Crowdcube, OurCrowd, Seedrs), mortgages, payments (Adyen, iZettle, SumUp, Tipalti), personal financial management (e.g. Tink), pension and savings (e.g. Nutmeg, SavingGlobal), working capital finance (e.g. MarketInvoice, Novicap), and even core banking (current accounts e.g. Number26, Holvi).

This is a description of a new infrastructure forming. These infrastructures, unseen, unknown to many has a unique utility operating system, that provides tools to create new possibilities. And, it is the operating system unique in design which becomes the disruptor not the individual entity in itself. Carlota Perez argues in her book Technological Revolution and Financial Capital,

When the economy is shaken by a powerful set of new opportunities with the emergence of the next technological revolution, society is still strongly wedded to the old paradigm and its institutional framework. Suddenly in relation to the new technologies, the old habits and regulations become obstacles, the old services and infrastructures are found wanting, the old organisations and institutions inadequate. A new context must be created; a new ‘common sense’ must emerge and propogate.

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