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This book is dedicated to Matt, my son, who is learning to code and has more potential than he can imagine, and to the Italians who invented modern-day banking.
The measure of intelligence is the ability to change.
—Albert Einstein
There are a few people whose support made Breaking Banks and the ongoing disruption possible. First, thanks to Rachel Morrissey, who keeps me sane and keeps everything going, and to Randall and the team at Voice America for giving me the opportunity to run the Radio Show that led to this idea in the first place. Second, thanks to the amazing participants and interviewees who gave their time and support for the book, all of whom were very patient through rounds of edits and other unintended consequences.
Thanks to the team and supporters of Moven, who continue to give their incredible support in this tough, but amazing journey; to the tribe of bloggers, friends, and supporters who regularly tune in each week to my show, tweet, and amplify the message, including Sudu, Jim Marous, Dave Birch, Brad Leimer, Dave Gerbino, Serge Milman, Robert Tercek, Bruce Burke, Duena Blomstrom, Mike King (no relation), and cover artwork designer J. P. Nicols (no h), Ron Shevlin, Deva Annamalai, Jeff Stewart, Matt Dooley, John Owens, Bryan Clagett, Jason Cobb, Adam Edge, Jenni Palocsik, Matt West, Jay Rob, Lydia, and the crowd of other followers whom I’m sure I’ve missed; and to Uday Goyal, Sean Park, Sim, Pascale, Naoshir, Nadeem, Yann, and the team at Anthemis, who never cease to amaze me with their network and support.
Thanks to Nick Wallwork, Jeremy Chia, and the team at John Wiley & Sons for their support.
Thanks to Jay Kemp, Tanja Markovic, Jules, and the team at ODE, who support my efforts to keep the disruptor message loud and clear on the road about 100 days of the year.
Finally, thanks to the disruptors, innovators, engineers, entrepreneurs, investors, and believers who are changing the world of banking every day.
Brett King is an Amazon best-selling author, a well-known industry commentator, a speaker, the host of the BREAKING BANK$ radio show on Voice America (an Internet talk-radio network with over nine million monthly listeners), and the founder of the revolutionary mobile-based banking service Moven (Moven.com or search iTunes/Google Play for “Moven”). King was voted as American Banker’s Innovator of the Year in 2012, and was nominated by Bank Innovation as one of the Top 10 “coolest brands in banking.” His last book, Bank 3.0 (available in seven languages), topped charts in the U.S., U.K., China, Canada, Germany, Japan, and France after its Christmas 2012 release.
King has been featured on Fox News, CNBC, Bloomberg, and the BBC, and in Reuters, Financial Times, The Economist, ABA Journal, Bank Technology News, The Asian Banker Journal, The Banker, Wired magazine, and many more. He contributes regularly as a blogger on Huffington Post.
The premise of disruption in financial services is relatively new. With the exception perhaps of the push for deregulation in the 1970s, banking is not known for huge leaps in innovation or significant shifts in the dynamic of the players involved. Sure, there have always been mergers and acquisitions, and some industry consolidation from time to time, but there’s never really been anything that is akin to the level of disruption we’ve recently seen in the music or publishing industries, for example, or the dynamics of the communications sector with the shift from the telegraph to the telephone, and then from fixed-line to mobile.
In the midst of the financial crisis in 2009, Paul Volcker, the former U.S. Federal Reserve chief, berated the financial industry in respect to its track record on innovation:
I wish somebody would give me some shred of evidence linking financial innovation with a benefit to the economy.
—Paul Volcker commenting at the Wall Street Journal’s Future of Finance Initiative, December 7, 2009
Volcker went on to claim that the last great innovation in banking was, in fact, the ATM machine. Volcker has a point. In all, banking hasn’t really changed materially in hundreds of years. Ostensibly, the nineteenth-century form of the bank branch is still largely recognizable today. While we have had some so-called branch of the future concepts, the way we do banking has remained largely unchanged over the past hundred years.
At least, that was true up until a few years ago when the Internet emerged. Today, we see significant shifts in banking, consumer behavior, and bank product and service distribution methods. We have seen dramatic changes wrought by technologies like the Internet, social media, and mobile banking. The recent global financial crisis has undermined trust in bank brands collectively, and while that trust may start to return in the coming months, for now it is a cause for open challenges to the traditional banking approach. We have social media and community participation giving transparency to the discussion on bank effectiveness, customer support, and fees, like never before. We have new disruptive models of banking, payments, and/or near-banking that are taking off and challenging the status quo.
It is entirely possible that banks, with their heavy regulatory burden, high capital adequacy requirements, massive legacy infrastructure, and long-held conventions, may just have trouble adapting to these tectonic shifts. Think of Kodak, Borders, and Blockbuster as examples of companies in other industries that have succumbed to disruptive business models, changing consumer behavior, or technology shifts.
However, it is also possible that some banks may survive intact because they can direct their not-insubstantial resources to evolving the big ship that is their bank brand and operations, and can put a new layer of innovative customer experiences and technologies over the old core, creating something new, something dynamic and adaptive. Right now, however, the former looks considerably more likely, purely because the inertia in banking is fairly well embedded around risk and compliance processes, regulatory expectations and enforcement, and those 30-to-50-year-old legacy IT systems that can’t easily adapt to the always-on, über-connected environment we live in today.
In May 2013, when I established a podcast radio show1 to tackle these concepts and questions, I set out with the intent of regularly interviewing the most disruptive players in the financial services space who are challenging the norms and attempting to turn traditional banking on its head, along with some of the most innovative leaders from within the sector trying to stay competitive. These two groups of disruptive innovators might represent different sides of the same problem, and while their approaches differ, the key takeaways or lessons they provide are extremely enlightening.
This book is not just a summary of those interviews; it is an examination of the new emerging business models, concepts, approaches, and constructs from a strategy, technology, and success point of view—what is working, and what isn’t. More importantly, we look at what traditional players can learn from these innovators to kick-start their own projects or initiatives, and what they have at risk if they don’t listen and learn. The interviews are insightful and take us in new directions, but also act as case studies of some of the techniques and models that are setting the tone for the next 20 to 30 years of banking. The data collected around these interviews and concepts is designed to give depth to understanding those models and providing statistical or quantifiable support for the various strategies.
In the chapters that follow, you will read about topics that include P2P lending, Bitcoin, and digital or cryptocurrencies, neo-banks or neo-checking accounts that challenge the basic bank account premise, social media’s impact on major bank brands, banks that have had dramatic growth despite no branch network support, leading indicators of changing consumer behavior, sustainable banking, financial wellness and the tools that help people save, how campaign marketing is disappearing and customer journeys are emerging, and how technology is becoming elegant, highly usable, and more responsive to the end consumer. These are the new core competencies of retail financial services.
The secret sauce of these new innovative approaches, however, is really still down to the individuals driving that change on a day-to-day basis. This is not just about implementing the right technology or whether you integrate social media or mobile into your customer-facing strategy. This is about what drove these innovators to try something different, and where they see the industry going next.
In each chapter, I ask these industry leaders what the next 5 to 10 years will bring. In many ways, this is my favorite part of the dialogue, because it shows that potentially some of the revolutionary approaches to banking, lending, and customer engagement we are experimenting with today will be far more disruptive on a longer-term basis to banking than we can even imagine.
These are some of the most innovative disruptors in the banking scene today. Listen to what makes them and their businesses tick. Listen to what drove them to start these new approaches in the first place, to challenge the norm. Most of all, however, just imagine where this will take us next.
These are the Innovators, Rogues, and Strategists rebooting banking—perhaps even Breaking Banks.