Banking decomposed or decomposing banks

What happens when your product is a username, your
processing is an API and your customer engagement is just an app?

It’s a question I’ve been playing with for a long time now:

• BaaS: Banking as a Service, February 2009 
• The future competitive battleground, November 2011
• Why all banks will change core systems, April 2013

and I’m still there, nibbling away at the traditional
structure of banks.

It’s purely that I had to develop a couple of new
presentations this week, and realised that all the innovative and disruptive models
of finance that are emerging are also nibbling away at the traditional structure
of banks:

• Fidor is nibbling away at the core deposit model of banks,
  as is Moven, Simple, Alior et al;
• Zopa is nibbling away at the credit markets, as are Smava,
  Prosper, Lending Circle et al;
• Currency Cloud is nibbling away at the cross-border
  activities of banks, as is Bitcoin, Azimo, Klickex et al;
• Kickstarter is nibbling away at the commercial banking operations
  of banks, as are Receivables Exchange, Funding Circle et al; and
• eToro is nibbling away at the investment operations of
  banks, as are Zulutrade, Stocktwits et al.

Every part of banking is being nibbled at by new startups, and
the business model of these startups begins with:  what happens when your product is a username,
your processing is an API and your customer engagement is just an app?

Zopa is a username, Currency Cloud is an API and Moven is an
app.  Each is targeting the product,
processing and engagement that a customer has with their finance.

Historically, the bank would have owned them all.

Today, they own nothing … except the customer who cannot be
bothered or who is not digitally engaged.

How many of those are there?

Oh, about 80 percent of the customer base.

How many of those will there be in five years, ten years,
twenty years or more?

Oh, about 20 percent.

The 80/20 rule applies just as much to disruptive change as
to anywhere else and just because banks own 80 percent of the customers today
does not mean that this will stay that way forever, particularly as the banking
model is blown apart.

So what does happen when your product is a username, your
processing is an API and your customer engagement is just an app?

Change …