IBS Journal June 2016 EDITOR’S NOTE
FACING UP TO AN EXISTENTIAL THREAT BANKS SHOULD STOP WORRYING ABOUT UBERISATION, AND CONCENTRATE ON THE REAL ISSUES AT HAND.
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Senior Editor Scott Thompson
Scott.Thompson@
ibsintelligence.com
t’s the done thing right now to talk up an impending Uber moment for banks. But here’s why it’s a non-starter. Uber has disrupted the minicab trade and, here in the UK, London’s black taxis, not massive corporations. It also has cash to burn, whereas its much smaller rivals don’t. It’s one thing to disrupt a ‘mom-and-pop’ business, it’s quite another to take on a big bank with a huge customer base and stacks of money. Not that the banking establishment can afford to be complacent. There’s an undeniable threat coming from FinTech companies, but it is not a question of whether some cool upstart is going to put a 100-plus year old organisation out of business, but instead of how the banking landscape is evolving to accommodate a much greater diversity of players, each of whom is looking to transform a small piece of the overall jigsaw.
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Unfortunately, many banks are reacting in the wrong way to digitally savvy new entrants. Lloyds Banking Group, for instance, is cutting 625 jobs and closing 21 branches. The move includes the offshoring of up to 82 roles in IT departments to its operations in India. It is part of the 9,000 job cuts announced in 2014 by the bank, which
is 9%-owned by British taxpayers. In the last issue of IBS Journal, I interviewed Tom Blomfield, CEO of mobile challenger bank Mondo. He told me that he had recently been at a dinner with a bunch of the big banks, talking to the CIOs and innovation people about digitisation, turning old manual processes into technology driven processes. “I asked what is the imperative here, do you believe you have to do this or else you won’t survive? No, the imperative today is cost cutting, rather than thinking about their whole business model,” he said. “By the time they realise the threat is existential it will be too late to address that threat. It’s not too late as things stand. I think if a bank reacted now, they have huge amounts of capital and an enormous incumbent customer base. But if they do nothing, there is an existential threat on the horizon and by the time they realise it’s there it will be too late. We’ll see. It will be an interesting two or three years, I think.”
It will indeed. Some of the big banks just don’t get it and I don’t believe they ever will. Some do (BBVA and JP Morgan, for instance). They know that you can’t cut your way to digital innovation. You need to be bold. And forget about the dead end that is Uberisation.
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