Recently I spoke about a topic now quite familiar among bankers: the disruptive impact new competitors are having on the industry. Companies like Lending Club, On Deck, PennyMac, SoFi are changing the game with entirely new business models.
Banks recognize the threat these companies present, and they are responding with digital, mobile and other strategies. But unlike the upstarts, banks are constrained by the dilemma of “flying the plane while building it”: compliance demands, sluggish revenue growth and huge cybersecurity risks.
To be sure, some disruptors will be flashes in the pan. Others will gain critical mass and truly threaten meaningful chunks of banking and financial services businesses. Regardless of which ones emerge as winners, disruption presents banks with immediate, formidable challenges.
Banks that recognize this reality can start to slipstream disruptive concepts into their business model and service offerings. They can choose to compete head on, creating their own start-up-like cultures internally. Or they can explore ways to work with disruptors, perhaps through investment and partnering opportunities.
What Banks Can Offer the Disruptors
Banks have plenty to offer the upstarts: their customer base still represents the vast majority of customers. They could use this to help build “clusters of value” based on who’s using what today, and they have much more experience creating scale. Or, from another perspective, banks can protect their client base while providing an ecosystem for innovators, and take a cut in the process. But possibly most importantly, disruptors are extremely likely to encounter the regulatory requirements banks face today as they gain critical mass. Banks know their way around regulations and compliance, which is just the kind of help disruptors might need.
Do you see your bank competing, collaborating, or both with disruptive new competitors? I’d love to hear what you see ahead.
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