The 1990 classic movie “Total Recall” has Douglas Quaid buying a virtual holiday to Mars from Rekall Inc. who sell implanted memories. Some 25 years later, we are not quite purchasing virtual holidays or implanted memories, but we are increasingly consumers of the virtual world.
Think of the music industry where 15 years ago we walked into a music shop and browsed CD’s. Similarly, we used to book our holidays through a local travel agent. Less than 7 years ago, the world operated without hand held devices; yet it seems incomprehensible that we could live without them today.
In 1992, I applied for a bank loan, which involved completing a 5-page application form in black legible capitalised letters, appending financial documents and waiting 4 – 6 weeks for the answer. Over subsequent years I‘ve applied for loans, and surprisingly the process has not really changed. More often than not, the Bank wanted my home as collateral.
The new religion
A Viacom Survey [i] showed that many millennials are ready to give up on banks with more than 33% not believing they will need a bank at all and some 70% preferring a visit to the dentist than listen to what the banks are saying.
A recent McKinsey Study revealed that some 70% of global banks stayed the same on a cost efficiency ratio despite leaps forward in mobile technology, cloud computing and web platforms.
When an industry is unloved and inefficient, faced with the twin forces of increasing regulation and new technology, disruption is imminent. There will be more change in the financial services industry in the next 5 years than the last 50 years. Globally, a new cohort of companies is innovating the financial services space across all types of transactions – payments, wealth management, personal investing, loans, insurance and equity capital raising.
I have been a loyal customer of my bank since 1992, I expect they know my spending habits, my income and my assets. Am I expecting too much when I want a bank that provides electronic identification, prepopulated application forms, an online friendly user experience, a credit decision in minutes, electronic documentation and funds in my account in less than 24 hours? Do I have unrealistic expectations?
Well apparently not. There are in excess of 100 fintech organisations globally providing these benefits to clients in countries around the world, yet just a handful of global banks could provide this full end-to-end experience online.
Banjo will provide this service to small business customers in Australia.
Where to next?
Projecting ahead to 2025, the ‘digital natives’ (Gen Y and Z) and the digitally savvy (Gen Z) will continue to drive this shifting landscape of activities, moving out of the banking system and new technology, expanding the pie in markets historically underserved by banks. The traditional model will continue to be challenged and broken. The consumer is driving the demand for new business models; not Silicon Valley. The digital transformation has client needs at the forefront of design and implementation.
With marketplace lending moving mainstream, there are opportunities for Banks, Regulators, Government and Small Business Councils to work proactively with the fintech industry to improve services and access to finance for all small business owners.
If bank lending hasn’t changed since before the internet, then it’s time we changed it.