Fear and or greed drive people to hoard leading to decline in aggregate consumption and consequently lower overall growth rate. This is not a sustainable proposition. In a world population of approximately 7 billion people only 1.2 billion are serviced by the banking system implying that the vast majority is under-served. Incumbents are contented to focus on sustaining innovation by upgrading existing products piling it with fancier features while simple, low-cost products are what regular and under-served customers are looking for. With unmet needs aplenty some of these will stimulate a response in the form of disruptive innovation.
Banking and finance
While the industry is tightly regulated, it is woefully in a poor state when it comes to performing its utility role and substantial negative externalities went unabated. In the process seemingly impenetrable entry barriers have been erected, at huge cost to protect the supposedly value created. The statistics of sustainable value creation does not match, and it incentivizes outsiders to challenge the status quo. It seeks to transform through the democratization of intermediation – disintermediation (decentralization). It targets the very core of banking – currency. It brilliantly understands how the role of a leaderless, trustless ecosystem can level the playing fields. It is disruptive innovation and the “Uber” moment has arrived for the banking & finance industry. The term fintech has been coined for this trending. Incumbent players have come to loath and fear, because it has the capability to cut away their roles i.e. middle man. The industry is left with a Hobson’s choice. It has to bite the bullet, and cannibalization in some form or another has to happen leading to value transfer / lost. The question will then be how well existing players can fit into the new paradigm. For sure, one needs to be nimble to cushion the pains and face the challenge head-on retooling and innovating. The focus will be on how to institutionalize the end-to-end processes that will address issues such as needs, approach, benefits and competition. The momentum has gathered to disrupt the banking industry. At the minimum, it provides a way to release resources (unlock wealth) that are tied up, benefiting segment(s) of the population willing to be proactive in growing the overall economic pie. Disruptive innovation can empower individuals to generate wealth without the attendant negative externalities while returning the benefits to societies in the form of consumption.