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Unbundling the bank: disruption in the banking sector

The future significance of banks in society is in the hands of millenials, an audience at Cass Business School heard last week.

by Lucy Chakaodza

The future significance of banks in society is in the hands of millenials, an audience at Cass Business School heard last week.

Cass Entrepreneurs Network hosted a fintech event, ‘Unbundling the Bank’ on the 9th April, in conjunction with Chinwag, to discuss disruption in the banking sector.

An expert panel, chaired by Ben Rooney, Co-Editor in Chief of tech news site, Informilo, debated whether financial innovation is likely to be driven by the banks, start-ups, or through partnerships between them.

The panel agreed that the output of the on-going digital transformation by banks will depend on the extent to which they are seen in the future as trusted and important by both millennials and, crucially, regulators.

They questioned the extent to which the existing fintech industry has disrupted the rails on which current banking infrastructure sits.  However, it was pointed out that recently announced regulatory requirements for UK/European banks to provide open access to customer accounts through application program interfaces (APIs) may finally lead to true unbundling - a technological response to regulatory pressure.
Banks do not seem destined to disappear but their role and relative bargaining/pricing power in the financial services ecosystem will significantly depend on this 'battle for trust' with emergent competitors, often tech companies from outside the legacy banking sector, the panel argued. 
Dave Birch, founding director of Consult Hyperion, said: “Banks aren’t a place where you store your money but should be a place where you store your identity”.

Digital technology will make innovation cheaper, easier and likely to happen faster said Gianvito Lanzolla, Professor of Strategy at Cass. However, he argued that new value curves in financial service markets leveraging a network effect are still likely to lead to one dominant player and a “long tail” of companies that find it hard to scale.
Jonathan Kramer, Sales Director, Zopa said that companies like his can continue growing over the long-term if they build a reputation that enables consumers to trust that, in their case, they don’t need to go to a bank for a loan.
The strength of companies like Squirrel is that they can build products really focused on customer need, unencumbered by institutional bureaucracy, and then work with the banks to implement them, said Mutaz Qubbaj, CEO and co-founder of Squirrel, a graduate of the Barclays’ Techstars programme.
Ben Rooney, co-Editor in Chief at Informilo, argued that many bank services might be better undertaken by specialist companies, but challenged the panel that surely it would be easier still to go to a single provider. 
"That may be true", countered Professor Lanzolla, "but need it be a bank – why not Facebook?"

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