Chapter 1. It’s the End of Banking (as We Know It)

The year is 1995. Terminator 2: Judgment Day, the box office smash hit directed by James Cameron, explores the battle for survival between the human race and Skynet, a highly advanced artificial intelligence construct that threatens our civilization with extinction. Working through servers, mobile devices, drones, military satellites, robots, sentient computers, androids, and cyborgs, the film leads us to picture a radically different futurescape, one not unlike our technically sophisticated landscape of today.

With advents in fields like robotics and artificial intelligence, the tension, uncertainty, and chaos of this entertaining cinema classic accurately mirror the current state of the financial world, disrupted as it is by the shadow of impending change cast by financial technology (fintech) and now Brexit.

It’s the end of banking as we know it.

Things have never been more unsettled since the anxious period after the 2008 financial crisis. Currently, the problem is not the misbehavior of big banking institutions but rather the limits of those institutions and the threat of disintermediation coming from startups that are faster, simpler, and cheaper, and also offer vastly improved customer experiences. In today’s financial ecosystem, there is much ado about experimentation through myriad new formats, including accelerators, labs, incubators, acquisitions, and partnerships involving stakeholders throughout the value chain, all diligently working on a response.

Banks are scrambling to find their way. And the frenzy often seems driven by fear, desperation, hope, and copycatting success from other fields like Uber or AirBnB. The incumbents are seeking out adaptive strategies in their rush to grow market share and to stay competitive and relevant...much like the humans trying to escape extinction in Terminator 2.

We covered key aspects of fintech, the disruptive megatrend taking hold of the financial world, in another O’Reilly Report, “Data Science, Banking, and Fintech: Fitting It All Together,” in which we reviewed key participants, products, and technologies.

In this report, we focus on several unexpected and extraordinary consequences of the fintech evolution enabled by digital and mobile technologies and the ubiquitous smartphone:

  • Big new commercial opportunities in global emerging markets making the efforts of investors, startup founders, and tech visionaries worthwhile

  • The socially transformative impact of fintech on financial inclusion for the previously unbanked

  • A trickle-back effect from emerging market activity reshaping and affecting the future of fintech and financial services in the developed world

The Fintech State of Mind

Fintech is not a phenomenon located in the isolation of banking centers in New York, London, and Singapore. It is closely associated with the financial services industry, which plays a key part in almost every major life decision we make, from buying a home to opening a bank account, setting up a credit card, starting a business, paying for a college education, or retiring, no matter where we are located. Fintech is about making the role banks and financial services play easier and more efficient. It is the oil, the fuel, the platform, the electric current through which money is moved, spent, saved, and loaned. It is not the preserve of old, white men in pinstriped suits meeting in stuffy conference rooms. It is the agora, the gathering place, the bazaar or marketplace for a wide variety of consumers at all levels and backgrounds of the economic pyramid to come together to transact. It is global and it is local.

In part, what has accounted for the excitement, interest, and investment capital in fintech are big, new disruptive ideas, particularly in the payments area: there are emerging technologies and platforms such as the Internet of Things (IoT), robotics, and AI, as well as fascination with distributed ledgers and blockchains (and the new technology layers added via the blockchain). Fintech overall, however, is much broader than that. Fintech is a movement and a concept in addition to being a technology. Elizabeth Lumley, director of global ecosystem development at Startupbootcamp FinTech and Startupbootcamp InsurTech—as well as a prominent fintech luminary—defines fintech as follows, adding a potent redirect to understanding what fintech really represents:

Don’t pigeonhole the benefits of fintech. ... Fintech is a mindset, not a sector. It’s the way you develop products around a consumer or business problem and that’s the real benefit fintech will have on this industry.


Consider this: digital and mobile technologies with fintech applications bring efficiency, effectiveness, and more comfortable living to Western populations. We all have smartphones. And we don’t think twice about consulting our handheld devices numerous times a day. We use them for everything from texting to email to Internet access and calendar appointments. A wide variety of app choices allows us to download, upload, or go shopping all day long. Point, swipe, click, and we’re done.

But to the less fortunate, these platforms provide access to far more basic needs. They are connecting previously isolated systems and populations, allowing them to share in economic and financial benefits that completely transform their lives. Fintech in emerging societies ushers in a dramatic leap forward in economic progress for the underserved, unbanked, and underbanked. Thanks in large part to the ubiquitous mobile phone and now the smartphone, poorer countries have become hot spots and big business, revenue, and market opportunities.

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