creative destruction of finance

The Creative Destruction

of FinancePaul Barter, @barterpaul, paul.barter@t4g.com

VP Research at T4G, Tech Strategy Prof at Schulich, Venture Advisor at MaRS

*not a real book, yet.

Late ’20sGood healthGood credit

EntrepreneurialNo real assets

Late ’50sGood healthGood credit

Preparing to retireNon-trivial assets

Imagine 2 People(from your perspective)

Abstracted, systematized, and centralized trust.

Giovanni di Bicci de' Medici

What is a Bank?

Whose trust?

Flow of cash

This brings us to today.

Capital is constrained

Basic assumption of finance

‘The world will be awash in nearly one quadrillion $ of

cheap capital by end of decade’

Basic assumption of finance

Incumbents are untouchable

“There’s a big role for Silicon Valley-style scorched earth entrepreneurship on Wall Street right now, and the people most likely to innovate are newcomers to the industry who have no real stake in the portions of it that need scorching”

“Banks, in particular, seem beset by boredom, unenthusiastic about actually making commercial loans, as many small and medium sized businesses will attest.

This reluctance is likely to erode banks' franchise permanently, as scores of alternative lending entities are being created to fill the void.“

Should we take these competitors

seriously?

General-Purpose Technologies (GPTs)

The next fortune.

What’s a general purpose technology?

What’s going on?

Why does it matter?

1. Invention2. Expansion3. Innovation

Information & Communication Technology(ICT)

Invention Expansion Innovation

*

*not a real book, yet.

What are some Financial Services?

Money transfer & PaymentsLoans & DepositsInvestments & ReturnsInsurance

Payments & Transfers

“PayPal could quite quickly become the largest consumer bank in the world.

You just need to take away the reasons that people remove money from the PayPal account.

And then it’s like, cool, why not just use it for everything?”

Loans & Deposits

Which narrative should you believe?

Investments and

Returns

Insurance

Where is there disruptive innovation?

Loans & DepositsMoney transfer & PaymentsInvestments & ReturnsInsurance

What about the giants?

Your margin is my opportunity.

425,000,000

800,000,000

What about the giants?

$60bn$160bn

What if…

+

+

Flow of cash

Where is there a real threat?

Loans & DepositsMoney transfer & PaymentsInvestments & ReturnsInsurance

How can incumbents

thrive?

Track the competition.

Accelerate

Be everywhere.

Test, track, and iterate.

And finally, don’t forget:

Go back to basics.

Shoot for the moon.