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Better Banking: Working for Consumers, not Bankers

With the rise of Bitcoin and the emergence of Blockchain technologies, much has been made of the digitization of financial services and the impact that distributed ledger and artificial intelligence technologies will deliver to the financial services category. The “ecosystem effect”, as it is called, is expected to impact the banking system in dramatic ways. For financial institutions who lead the innovation curve, McKinsey predicts that “digital disruption” will impact traditional banking businesses in generally favorable ways; for “digital laggards”, the impact will be highly unfavorable, potentially suppressing return on capital by up to 4%. In the minds of many industry analysts and luminaries, the banks which digitize fastest will win in a big way, while those who lag behind will struggle.

I just had the opportunity to speak on the topic of Digital Disruption for Financial services at the Blockchain Global Summit in Santa Clara. The conversation featured leaders from traditional financial service and banking brands all exposing the practical impacts of digitization and blockchain strategies on the banking business. The general consensus (mostly shared by McKinsey) was that advanced technologies will help control costs, streamline operations, and return significant bottom line benefit to the bank’s P&L and balance sheets.

We were shocked by one overarching omission--nobody mentioned a word about how these technologies will deliver value to the consumer. This was shocking to us, given the inherent nature of these technologies and the consumer-centric point of view we have toward technology development overall. Upon second thought, however, our confusion was alleviated by one simple insight--traditional financial institutions, namely banks, have NEVER been about the serving the consumer. Why would the advent of new technologies change their self-centered focus now?

One of the greatest powers of blockchain in the ability to disintermediate traditional hierarchical org structures to empower average users across an ecosystem. This is the core of the future that blockchain promises. A financial firm that was truly consumer centric would recognize this, and would engineer their technologies to better empower users, not to merely improve their profits and pad their already overflowing coffers. We envision a new world where banks are owned by their customers, enabled by technology, and made to serve the community. This is the promise that blockchain offers to the masses--peer to peer lending, insurance, investment, and financial services. This vision cannot be realized by traditional banks... their incentives are too fixed and entrenched. This vision cannot be realized by the traditional “internet companies” like Google, Apple, or Amazon... their focus is to diffuse and sprawling.

The only way to truly democratize finance is to start again, from scratch, with the community at the center of the business model and value proposition.

Together, as consumers, we hold the power to make the financial services market what we want it to be. Together, as a community, we will realize this future.

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