I spent last night and this morning getting to know some of the world’s most prominent financial technology (fintech) start-up champions such as Chris Larsen of Ripple and Daumantas Dvilinskas of TransferGo. These are just two of the entrepreneurs who are disrupting the traditional world of finance with faster, cheaper options for everyday consumers.
Now, the very word disruption conjures up images of destruction in many people’s minds. Are these new digital platforms going to bring banks crashing to their knees?
It does appear that the new kids on the block certainly are gunning for the established big players, if TransferWise boss Taavet Hinrikus is anything to go by. “Why should a money transfer cost so much money?” he asked at an event hosted by the online technology magazine TechCrunch last night. “I am confused as to why a bank should charge 10% for something that’s as easy as sending an email.”
But are blockchain, TransferWise and other new money transfer systems going to wipe out familiar high street banking names? Not so, according to many of the actors gathered in Davos. For one thing, the slice of pie still available for the digital banking industry is huge – 85% of all consumer transactions around the world are still conducted in cash. That’s a lot of potential new customers.
And there already exists a surprising amount of collaboration between fintech and traditional goliath banks in designing the sleeker, smarter and more cost-efficient financial system of the future.
Here's what Ripple's Chris Larsen had to say about how the world of fintech will change things for consumers:
Spirit of collaboration
Both Ripple and TransferGo – a system for migrant workers to send remittances back home – have established strong links with plain vanilla banks. When TransferGo first started out, banks would shut down their accounts when they found out what the company was doing, Dvilinskas told me this morning. But this has now changed.
“Banks building monopolies was the old business model. The new era of banking is based on collaboration and cooperation,” he said. “Banks are realising that they can deliver a better product by partnering with specialised providers. This change is being driven by demand from consumers.”
Ann Cairns, president of International Markets for Mastercard told last night’s TechCrunch event that she is constantly on the lookout for new start-ups to partner with or acquire.
This new spirit of cooperation comes also from the unlikely source of Silent Circle, the Swiss-based maker of the encrypted Blackphone. It appears that hackers are constantly trying to break their codes, so Silent Circle employs its own team of hackers that test security and a separate dedicated team that provides patches when needed.
But Silent Circle also cooperates with technology giants, such as Google, sharing experiences on cyber attackers to better bolster their defences.
Finally, even the giant global banks have put aside some of their competitive instincts to team together on new technology. Eleven banks, including Switzerland’s UBS and Credit Suisse, announced on Wednesday that they have joined forces to test out blockchain capabilities.
Is there no end to this spirit of good neighbourliness?