Nils Elmark: Why financial executives need to dream bigger dreams
By Nils Elmark, consulting futurist, Incepcion Ltd., London
I don’t particularly like the word ”disruption”. It’s not positive to get disrupted while you are busy. Yet the word has been closely related to FinTech startups the last 5-6 years and the disruption of the incumbent banks and not least their employees have been grave. More than half a million bank-jobs in Europe have disappeared and the trend continues.
The term disruption is as far as I can read an abbreviation of “creative disruption” which was coined by professor Clayton Christensen at Harvard. He sees it as a mechanism in the marketplace where young startups disrupt the status quo and demonstrate flaws in established business models.
And that is indeed the case. Last summer a lot of bankers got a wakeup call when Wirecard suddenly roared past Deutsche Bank on the stock exchange. Many of us didn’t even know the Munich wunderkind at the time. We do now and it is a great example of creative disruption by FinTech. Right now, Wirecard has about 6.000 employees and a market value of 14 billion Euro while Deutsche Bank has about 90.000 employees and a market cap of 16 billion. The two organisations do more or less the same: move other people’s money around. But an employee at Wirecard does it about 15 times more efficiently thanks to new technology and a new business model. And we see exactly the same pattern when we compare Barclays to PayPal or Amazon to Walmart, for that matter.
This is creative disruption in full swing. What can the incumbent banks do about it? And the insurance companies because the same disruption is happening with InsurTech. Many banks have reluctantly adjusted to the disruptors. But that will only make the incumbent financial companies shrink; if the newcomers are 10 times more efficient then the old-timers are 10 times too big. The economist Joseph Schumpeter coined an even sadder word for this 70 years ago: “creative destructions”. He didn’t see the newcomers as disrupters but as destroyers that introduce radical innovation.
I have worked with FinTech startups and venture capitalists in London the last five years and if the top executives of the established financial institutions want to match the small startups and the increasing number of unicorns they have to raise their level of ambition. The incumbents have to dream bigger dreams! They have to forget the past and leave the old business models behind and instead take the new FinTech and InsurTech tools on an adventure. We have to re-design the entire industrial infrastructure over the next 20 years and we need a financial industry many times more powerful than the one we have today to accomplish that.
Nils Elmark is consulting futurist and founder of Incepcion in London – a consultancy that has specialised in fintech and helps financial institutions re-imagine their business future. He’s a keynote speaker and columnist for a number of financial magazines. www.incepcion.co.uk
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