Disruption is the new normal in most industries and certainly this has been the case for financial services. The world of channels alone has been explosive, as has analytics and the world of data. Data, automation and customer interaction have all changed significantly in the last ten years — and this will continue to increase exponentially in the coming years with the Internet of Things (IOT)
We don’t really know what impacts IOT will have on financial services yet, but early glimpses are exciting (or scary) depending on your perspective on change. I think the word disruptive fails to really give it proper scale.
The reason that the change will be so profound is because when IOT intersects with financial services it enables entirely new business models and revenue structures and it enables a degree of seamlessness that is currently unheard of. The act of engaging in a payment transaction becomes implicit rather than explicit: the payment just happens. The pricing model is based on individual behaviour and history. When the things are all talking, and talking payments there will be entirely new concepts that emerge that the current world is not expecting.
Uber is an example of a company that is disrupting the transportation space in a very simple way – ease of use, immediacy, and payments integration. This simple formula has the taxi industry up in arms in many cities – tires are being slashed, drivers are being accosted.. protests in the streets; people don’t like to see their worlds turned upside down.
Financial services disruption will be even greater for several reasons:
- There is a growing backlash sentiment against “the big banks” and populist momentum will quickly support disruptive offers.
- Financial services is an information business; IOT is all about information. Physical goods don’t need to change hands, cars don’t need to be dispatched. This makes it easier to invent new business models.
- The rewards are great for those that can lead the disruption, this will motivate new entrants and capital focused on this topic.
- The Industry as a whole is struggling with complexity and legacy and these factors will not help when the time comes to pivot in new directions; organizational cultures are also not prone to change.
The IOT is not bad news for the financial services industry, it’s just a coming age of increased change and disruption – likely with new categories and a new list of winners and losers. Apple’s iBeacon is an early indication of how payments will be changing and it looks seamless.
I have no idea what the future of financial services will bring as it intersects with the Internet of Things, but the possibilities are amazing and disruptive. Where to turn? Given the options outlined in the diagram above I think I have found my choice!