Disruption has become a clichéd word almost rinsed of meaning by its quotidian use. But, this does not divest the term and its practice from its potency. Disruption in the world of business, finance and commerce is real and it is forcing incumbents to adapt, adopt or wither away or even die. One such sector that is being disrupted swiftly is banking where the adoption of technology and digitisation is not only leading to new business models and ways of working but some of the traditional functions of banks are being encroached upon.

The function that is perhaps feeling the pinch is retail banking and payments system thereof wherein nimble disruptors are taking over both the retail function and offering new products and services. To state the obvious, this trend known with the neologism ‘fintech’- a combination of finance and technology- has been enabled by the forces of technology, advances in computing, communication and the widespread penetration and use of smartphones, altering the competitive landscape of banks in the process.

Nimble players are foraying into the retail banking space and offering stand-alone retail and payments services at the click of a button with important addons like security architectures that ensure a smooth and secure flow of monies. In essence, apps on handheld devices are competing vigorously with incumbent banks that are burdened with legacy systems and old ways of working. While it's unclear what the customer attrition rate is from traditional banks but the ease of using an app for banking services intuitively suggests there is and will be the migration of customers to apps offering these services.

The how’s of the encroachment of nimble fintech players on the turf of banks can be gleaned by understanding the value chains of banks. Broadly speaking, every firm is comprised of a value chain. The forces of technology, globalisation and advances in communication allow a given firm, say a bank, to disaggregate its value chain- outsource parts of it, delegate responsibilities, rejig relations with suppliers buyers and so on. This is the traditional view of the value chain where it was assumed that the firm’s given approach to it was contingent, to a large extent, on the nature of competition and profitability potential thereof in the industry.

But now the nature of competition has changed; it is not merely between incumbents in either a static or dynamic competitive environment but new players are disaggregating the value chain of a given firm, sector and then eating away into the business or a component of the value chain of the firm or business. In banking, the first to have borne the brunt of the assault is the retail function. To extend the analysis, this assault might even be the first and not the final one. That is, other aspects of the value chain of banks might be attacked as technology makes advances with banks remaining a husk of their former selves. But, for the purposes of the analysis here, the unit of analysis is the retail function of banks.

Given the disruption and entry of new players, rapidly falling entry barriers, is retail banking dead then? Will an app be your retail banker in the near future?

While much remains in the domain of the ‘unknown unknown’ what may be stated with a degree of clarity is that there is a clear threat to the retail function of banks. But, this does not mean that banks will divest themselves of their retail portfolios and payments systems and cede space to nimble, new tech-savvy players. What this means is that the form and delivery of retail banking is and will change. &nbsp;There will be agile players(basically apps) that will offer retail services, arbitraging interest rate differences and exchange rate differentials in payments systems and also offering a compendium of allied services. But, traditional banks will not give up and cede this space to these players. Their best bet is to actually think like disruptors and compete along with the same dynamic and form. This is what many are doing.

In essence then while there is talk of the death of retail banking but this may not come to pass as banks will compete in a different idiom and take the disruptors on their own turf and beat them at their game. Or, as is happening in some cases like say, Santander, incumbents will acquire the disruptors. Whatever way competition in banking will evolve, it is that the form and shape of retail banking will change but the function will remain and even be part of the remit of incumbent banks’ functions. But, all in all, the nature, form and scope of the competition will ensure that customer is king(or queen as the case may be)! 
 
&nbsp;(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)&nbsp;

&nbsp;

Disruption has become a clichéd word almost rinsed of meaning by its quotidian use. But, this does not divest the term and its practice from its potency. Disruption in the world of business, finance and commerce is real and it is forcing incumbents to adapt, adopt or wither away or even die.

Disruption has become a clichéd word almost rinsed of meaning by its quotidian use. But, this does not divest the term and its practice from its potency. Disruption in the world of business, finance and commerce is real and it is forcing incumbents to adapt, adopt or wither away or even die. One such sector that is being disrupted swiftly is banking where the adoption of technology and digitisation is not only leading to new business models and ways of working but some of the traditional functions of banks are being encroached upon. The function that is perhaps feeling the pinch is retail banking and payments system thereof wherein nimble disruptors are taking over both the retail function and offering new products and services. To state the obvious, this trend known with the neologism ‘fintech’- a combination of finance and technology- has been enabled by the forces of technology, advances in computing, communication and the widespread penetration and use of smartphones, altering the competitive landscape of banks in the process. Nimble players are foraying into the retail banking space and offering stand-alone retail and payments services at the click of a button with important addons like security architectures that ensure a smooth and secure flow of monies. In essence, apps on handheld devices are competing vigorously with incumbent banks that are burdened with legacy systems and old ways of working. While it's unclear what the customer attrition rate is from traditional banks but the ease of using an app for banking services intuitively suggests there is and will be the migration of customers to apps offering these services. The how’s of the encroachment of nimble fintech players on the turf of banks can be gleaned by understanding the value chains of banks. Broadly speaking, every firm is comprised of a value chain. The forces of technology, globalisation and advances in communication allow a given firm, say a bank, to disaggregate its value chain- outsource parts of it, delegate responsibilities, rejig relations with suppliers buyers and so on. This is the traditional view of the value chain where it was assumed that the firm’s given approach to it was contingent, to a large extent, on the nature of competition and profitability potential thereof in the industry. But now the nature of competition has changed; it is not merely between incumbents in either a static or dynamic competitive environment but new players are disaggregating the value chain of a given firm, sector and then eating away into the business or a component of the value chain of the firm or business. In banking, the first to have borne the brunt of the assault is the retail function. To extend the analysis, this assault might even be the first and not the final one. That is, other aspects of the value chain of banks might be attacked as technology makes advances with banks remaining a husk of their former selves. But, for the purposes of the analysis here, the unit of analysis is the retail function of banks. Given the disruption and entry of new players, rapidly falling entry barriers, is retail banking dead then? Will an app be your retail banker in the near future? While much remains in the domain of the ‘unknown unknown’ what may be stated with a degree of clarity is that there is a clear threat to the retail function of banks. But, this does not mean that banks will divest themselves of their retail portfolios and payments systems and cede space to nimble, new tech-savvy players. What this means is that the form and delivery of retail banking is and will change. There will be agile players(basically apps) that will offer retail services, arbitraging interest rate differences and exchange rate differentials in payments systems and also offering a compendium of allied services. But, traditional banks will not give up and cede this space to these players. Their best bet is to actually think like disruptors and compete along with the same dynamic and form. This is what many are doing. In essence then while there is talk of the death of retail banking but this may not come to pass as banks will compete in a different idiom and take the disruptors on their own turf and beat them at their game. Or, as is happening in some cases like say, Santander, incumbents will acquire the disruptors. Whatever way competition in banking will evolve, it is that the form and shape of retail banking will change but the function will remain and even be part of the remit of incumbent banks’ functions. But, all in all, the nature, form and scope of the competition will ensure that customer is king(or queen as the case may be)! (Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)

Digital disruption: Can traditional banking hold its own?

The ubiquitousness of technology is such that it affects individuals, communities, societies and nations. &nbsp;Social media played a major role in the Brexit referendum, while Trump uses it to his benefit in the US.&nbsp;

In India, political parties use it to maximise their reach and impact. National security and international business have also become entwined because of technology; take for example the imbroglio about Huawei’s 5G technology in the UK and the arrest of its CFO in Canada. Every few years, new technology is used in a way that jars society and raises questions around morality. The history of technology is also the history of human and national turpitude.&nbsp;

Commercial farming grew on the sweat of slave labour. The success of the industrial revolution was fueled by inhuman working conditions. Eisenhower’s ‘atoms for peace’ resulted in a nuclear arms race. The feel-goodness of early Facebook has morphed into a medium that causes suicide, induces real rage through false news and broadcasts murder.&nbsp;

One can blame the human mind because technology, on its own, is impotent. Innovation and invention are based on problem-solving and creating or feeding a need. There is usually a utopian ideal that fuels these inventions. For example, Mark Zuckerberg wanted to unify and globalise people. In retrospect, he was delusional to assume everyone would live as per his dream. He, like other fellow innovators and inventors, fail to recognise two things. The first is that people have minds of their own and are capable of finding new uses to technology. The second is what Yuval Noah Harari says in his book Homo Deus — human’s ability to think of the future is limited by their minds being stuck to the present way of thinking. Thus, even if one thinks of the future, it is framed by current conditions.

Creativity is a key survival feature and finding new uses to technology is inherent to progress. Did NASA ever think their Velcro would be used to fasten shoes? Were washing machines designed to whip up lassi? This thinking out-of-the-box has also led to stun guns being used by both the butcher and police and, transport being used by terrorists to mow down people.

Though Intelligent design has no scientific basis to explain evolution, many of man’s endeavours have been based on its literal application. Quite a few pedigree dogs are results of selective breeding programmes carried out a few centuries earlier. Is it such a giant leap to argue that eugenics crept out from the success of such work?

Should human progress be measured by how technology percolates into everyday life? Or when technology use interchanges between human and animal? The dis-assembly line developed in the early slaughterhouses of the US to slaughter and carve beef efficiently and cheaply inspired Henry Ford’s assembly line. &nbsp;The argument for and against genetic manipulation crisscrosses its application on crops and humans. Animals, vegetables and humans are pumped with chemicals and hormones to enhance their performance — whatever that may be. Artificial insemination and in vitro fertilisation has converted livestock into baby making machines while childless couples see these technologies as a last resort on the road to fulfil the desire of becoming parents.

The choice to introduce technology into every day is a slippery slope. It opens the door to its other potential uses by creating precedents which permit its use for circumstances not initially conceived. Such precedents reduce moral hesitance. When one speaks of laws to regulate these technologies, one is actually seeking to curtail the devious part of human imagination. However, these regulations come a bit late in the day when that technology has already got a foothold.&nbsp;

There are ethics committees for scientific experiments and they focus on the condition of experiments and its morality. Government agencies test chemicals for health and environmental impacts. There are no such bodies for social media platforms, which have a major psychological and physical impact on users. &nbsp;

Society has progressed by meeting its desire for better, more, easier and cheaper. These are relative and differ from individual to individual and from group to group. Thus the routes to reach these goals also vary. It is no surprise then that many are unpleasantly surprised, frequently at that, when technology in the hands of another swings the other way. &nbsp;

Technologies inadvertently convert humans into lab rats. There is now concern about the use of pesticides, plastics, coal for energy, the aha moment for appreciating the negative impact of the technologies took time and are still debated. However, the concern is more compelling for social media platforms because the impacts on society and government are immediate and undeniable.&nbsp;

&nbsp;Facebook and others are tweaking their programmes to prevent hate and false information — things not thought of before release. But these tweaks and laws occur only after society has faced the brunt its abuse. &nbsp;The way society use technology is proof that its members are neither prescient nor have 20-20 hindsight. In fact, it would seem that the relationship with technology is nothing but a series of unfortunate incidents.

Innovators conceive of the use of their technology by society in monochrome — based on their limited and, even biased, perception of it. Just as consumer companies conduct market surveys, are innovators carrying out market research to understand the many other ways this technology can be used when released into society?

Society needs to begin a discussion on the idea of progress and technology. Tales from Robert Louis Stevenson and Mary Shelley to Ray Bradbury and others have a note of caution, which we have yet to heed. 
 
(This article was originally published on The DNA. Read the <a href="https://www.dnaindia.com/analysis/column-things-innovators-must-know-2756186">original article</a>)

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL.)&nbsp; 
&nbsp;

The ubiquitousness of technology is such that it affects individuals, communities, societies and nations. Social media played a major role in the Brexit referendum, while Trump uses it to his benefit in the US.

The ubiquitousness of technology is such that it affects individuals, communities, societies and nations. Social media played a major role in the Brexit referendum, while Trump uses it to his benefit in the US. In India, political parties use it to maximise their reach and impact. National security and international business have also become entwined because of technology; take for example the imbroglio about Huawei’s 5G technology in the UK and the arrest of its CFO in Canada. Every few years, new technology is used in a way that jars society and raises questions around morality. The history of technology is also the history of human and national turpitude. Commercial farming grew on the sweat of slave labour. The success of the industrial revolution was fueled by inhuman working conditions. Eisenhower’s ‘atoms for peace’ resulted in a nuclear arms race. The feel-goodness of early Facebook has morphed into a medium that causes suicide, induces real rage through false news and broadcasts murder. One can blame the human mind because technology, on its own, is impotent. Innovation and invention are based on problem-solving and creating or feeding a need. There is usually a utopian ideal that fuels these inventions. For example, Mark Zuckerberg wanted to unify and globalise people. In retrospect, he was delusional to assume everyone would live as per his dream. He, like other fellow innovators and inventors, fail to recognise two things. The first is that people have minds of their own and are capable of finding new uses to technology. The second is what Yuval Noah Harari says in his book Homo Deus — human’s ability to think of the future is limited by their minds being stuck to the present way of thinking. Thus, even if one thinks of the future, it is framed by current conditions. Creativity is a key survival feature and finding new uses to technology is inherent to progress. Did NASA ever think their Velcro would be used to fasten shoes? Were washing machines designed to whip up lassi? This thinking out-of-the-box has also led to stun guns being used by both the butcher and police and, transport being used by terrorists to mow down people. Though Intelligent design has no scientific basis to explain evolution, many of man’s endeavours have been based on its literal application. Quite a few pedigree dogs are results of selective breeding programmes carried out a few centuries earlier. Is it such a giant leap to argue that eugenics crept out from the success of such work? Should human progress be measured by how technology percolates into everyday life? Or when technology use interchanges between human and animal? The dis-assembly line developed in the early slaughterhouses of the US to slaughter and carve beef efficiently and cheaply inspired Henry Ford’s assembly line. The argument for and against genetic manipulation crisscrosses its application on crops and humans. Animals, vegetables and humans are pumped with chemicals and hormones to enhance their performance — whatever that may be. Artificial insemination and in vitro fertilisation has converted livestock into baby making machines while childless couples see these technologies as a last resort on the road to fulfil the desire of becoming parents. The choice to introduce technology into every day is a slippery slope. It opens the door to its other potential uses by creating precedents which permit its use for circumstances not initially conceived. Such precedents reduce moral hesitance. When one speaks of laws to regulate these technologies, one is actually seeking to curtail the devious part of human imagination. However, these regulations come a bit late in the day when that technology has already got a foothold. There are ethics committees for scientific experiments and they focus on the condition of experiments and its morality. Government agencies test chemicals for health and environmental impacts. There are no such bodies for social media platforms, which have a major psychological and physical impact on users. Society has progressed by meeting its desire for better, more, easier and cheaper. These are relative and differ from individual to individual and from group to group. Thus the routes to reach these goals also vary. It is no surprise then that many are unpleasantly surprised, frequently at that, when technology in the hands of another swings the other way. Technologies inadvertently convert humans into lab rats. There is now concern about the use of pesticides, plastics, coal for energy, the aha moment for appreciating the negative impact of the technologies took time and are still debated. However, the concern is more compelling for social media platforms because the impacts on society and government are immediate and undeniable. Facebook and others are tweaking their programmes to prevent hate and false information — things not thought of before release. But these tweaks and laws occur only after society has faced the brunt its abuse. The way society use technology is proof that its members are neither prescient nor have 20-20 hindsight. In fact, it would seem that the relationship with technology is nothing but a series of unfortunate incidents. Innovators conceive of the use of their technology by society in monochrome — based on their limited and, even biased, perception of it. Just as consumer companies conduct market surveys, are innovators carrying out market research to understand the many other ways this technology can be used when released into society? Society needs to begin a discussion on the idea of progress and technology. Tales from Robert Louis Stevenson and Mary Shelley to Ray Bradbury and others have a note of caution, which we have yet to heed. (This article was originally published on The DNA. Read the original article) (Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL.)

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Digital disruption: Can traditional banking hold its own?

National security and international business have become entwined because of technology