BID® Daily Newsletter
Dec 15, 2015

BID® Daily Newsletter

Dec 15, 2015

Untangling The Flow Of Disruption


Geeks relate to the novel entitled The Innovator's Dilemma by Harvard professor Clayton Christensen because it gives them a backbone for the virtue of disruption. The theory is that well established companies tend to underrate small competition. The top brass usually concentrates on expensive products targeted to existing customers. However, there could well be cheaper products out there that low-end customers would gladly embrace. Innovative products will always enter the market via the side door and eventually the high-end customers will also buy in. An example is how mainframe computer technology experts didn't see mini computers coming and history repeated itself when mini computer specialists trivialized the advent of personal computers, which have now been disrupted by smartphones.
The system of disruption thrives on mass appeal. Eric Schmidt, chairman of Alphabet, the parent company of Google, is a subscriber to the disruptive approach.
In the banking industry, there are also seeds of disruption. Financial geeks are ready to defy the mindset of well-tailored executives in corporate empires, all with the blessing of Silicon Valley. Fintech start-ups abound and bankers are feeling pressure to change their business model too.
More and more customers are using more and more technology, so if only community bankers could get their core providers to offer the same. These notoriously slow innovators (core systems that is) are holding up the opportunity for community banks and giving larger banks more of an edge when it comes to capturing new customers and retaining existing ones.
Financial technology or fintech companies are abound. There are tech companies that offer products that alert users when fees are charged by banks or other financial entities; online lending portals; financial decision-making tools; robotic wealth management; online crypto-currency payments systems; wearable security; biometrics; mobile payments; ecommerce payments; and hundreds and hundreds more. It seems nearly everyone wants to eliminate banks these days by taking everything online into an unregulated world far from the reach of banking regulators. Heck, you can even make payments to other people using easily hacked email and no one seems to really care.
We wonder where all this will go and how long it will take to get there. Regulators seem to be waking up quickly to the fact that once financial activities leave the banking world they are unlikely to come back. The Fed needs to control movement of money, interest rates and other things so at the very least we wonder how they can raise interest rates on emailed money outside the system. Imagine the future intricacies our financial system will absorb and where it could eventually end up and your mind can quickly get tired.
For community bankers we think the best move is to bring in the sales rep from your core system provider. Grill them on what technology they have now and what they expect to launch next year. We say this because 4 core providers control everything really in community banking technology, so what they offer will dictate what you can offer. Basically, anything that touches a customer eventually touches the core, so what they have is what you get. Keep asking, call every so often and check in now and again with other banks to see what they are doing.
Finally, keep talking to customers as you enhance your website, empower your sales teams with technology and try your level best to stay in front of your customers and on top of the technology wave. Doing so is tough, but if you can figure things out along the way even incremental movement is positive.
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