Turn on any financial news show or click on any tech blog and you will see a bevy of content about how dramatically #fintech will change in the next few years. Dan Schulman, PayPal’s CEO, has said that “the financial technology (#fintech) sector is going to change more in the next five years than it has done in the last 30...millennials are changing the shape of many industries, in particular the finance sector.” (@CryptoNews) Shulman then points to the “social” experience that attracts users to Venmo as an example of how experiential demands are changing.
This is all well-and-good, but misses the bigger, more important point--younger customers have a different value structure, one that requires more transparency, inclusion, and fairness. These consumers have looked at today’s financial services sector and found their severely lacking. Adding emoji to a transaction will not alleviate their fundamental dissatisfaction with the core products.
This is what makes the recent rise of #blockchain, #AI (artificial or augmented intelligence), and #cryptocurrencies so dangerous to banks and financial service institutions. Blockchain represents, “fundamentally, a decentralization of power. Many of our previous assumptions about formal organization are being challenged by shifts to distributed forms of trust...they no longer need a central institution to vouch for the other party.” (@WeForum) It isn’t that millennials don’t trust individuals; they certainly do and in many respects are more trusting of people than prior generations. Rather, they don’t trust human-run institutions, and for good reason. Institutions failed these consumers during the economic crisis and, to date, have suffered no repercussions from that breach of trust.
So now we see a flurry of activity regarding traditional banks investing in blockchain or distributed ledgers to get a jump-start on the coming consumer revolution. "Big banks are investing in Blockchain, not because of the democratization of the product or business models, but to reduce costs, while still controlling the data." (@CNBC) This is a tactical solution to a strategic problem...their morals, values, and business models haven’t changed; they just intend to use new technology to pad their already fat margins. There is no clear intention to return value to the consumer, and if history is a guide, these new platforms will be used to reward executives at the top, not users.
We envision a different future. Imagine a future where banks served their customers’ interests first and their firm’s interests second. Imagine a future where a bank paid the community of depositors for the interest they earned from their loans instead of paying themselves. Imagine a future of truly peer-to-peer financial services, developed by a community of consumers and issued to that community, with the provider merely facilitating the transaction. Imagine a world where a firm’s sole mission is to help their consumers build wealth, not their executives. In this world, “Individuals can now enter into direct peer-to-peer trusted exchanges with strangers.” All they need is a firm to certify financial fitness. The rest is up to the users.
“[Blockchain’s] rise may reflect, for better or worse, a monumental transfer of social trust: away from human institutions backed by government and to systems reliant on well-tested computer code. It is a trend that transcends finance: In our fear of human error, we are putting an increasingly deep faith in technology.” (@NYTimes)
In the future we envision, all financial services will be provided by a “financial services community”, where participants aid each other in the facilitation of wealth generation. Payments, loans, investing, insurance, or even a new model for credit will be created based on a behaviorally based, socially driven, and cryptographically secure platform. The digitization and democratization of financial services requires that we start anew, with people at the center of the whole model, and technology designed from the beginning to serve the community. The future is bright, and the momentum is on our side.
NY Times: https://www.nytimes.com/2017/12/18/opinion/bitcoin-boom-technology-trust.html