Business finance: A load of shylocks or simply a sector dying to change

street sign for 'Change Alley'

I read an interesting article this week from Nasir Zubairi, Head of Product Marketing at the Currency Cloud.  His post, Selfish Shylocks, published via the Huffington Post, takes a look at the state of innovation – in general – and the lack of innovation – specifically – in the banking sector.

He makes some really good points, explaining that:

  • Innovation improves the status quo and substantially alters it
  • Innovation focuses on making things better for customers

But he also laments the fact that, in general, UK banks have a. forgotten to share the benefits of innovation with their customers and b. tried to avoid any sort of innovation that promotes anything other than higher profits.

In seeking to explain why the big banks get away with it, Zubairi quotes the stark statistics that prove how remarkably un-elastic customers are when it comes to financial services.  “Out of 64 million bank accounts in the UK”, he tells us that “less than 0.1% have voted with their feet and shifted banking provider in the four years to the end of 2011.  Even then the likelihood is that the switch was to one of the other three big banks.”

The rest of the article rightly applauds some of those at the frontier of new finance.  I agree that new entrants such as Bank Simple, Holvi, Movenbank and The Currency Cloud represent the future of finance but it’s probably also worth asking why now? What needs to change?  What will make people vote with their feet?  Why will things ever be different?

And to answer those questions, I’d add another point to those above describing innovation.

Innovation frequently happens when developments in products or services coincide with some bigger, more important change in the way we collectively live our lives.

The i-pod didn’t create digital music.  The i-phone didn’t invent the smartphone.  Rather they are examples of great product design that came along at just the right moment to capture the public imagination.

It might seem ridiculous to think that something similar could happen to the banking industry, to a sector characterised by complexity and – let’s be honest – boredom.

But, honestly, I really do think something is starting to happen.

Over the summer, I read a book by Harvard professor Youngme Moon called Different. Escaping the Competitive Herd. Standing out in a world where conformity reigns but exceptions rule.

 

Apart from being amused by the very length of that title, I was struck by how relevant the last bit is to what new finance is trying to achieve.

“Standing out in a world where conformity reigns but exceptions rule”

Surely, that sums up where new finance is at right now?

Moon makes some fantastic observations about why the time for change is now, and has already begun.  She notes that many “businesses have forgotten the point of it all – which is to create meaningful and compelling product offerings.”

So can banking – lending or borrowing money – be meaningful?

Yes.

I’ve already explained why I think new finance is more than simply a romantic notion and I wholeheartedly agree with Moon that the global recession has set the wheels of change in motion; “the storm (has) refocused us all in some collective way… even those who were financially secure have begun rethinking their most basic consumption patterns… the age of abundance is over. Not because things are no longer abundant, but because abundance has lost its status as our reigning aspiration.”

So, new finance.  Innovative?  Yes.  Meaningful?  Yes.  Poised to take advantage of being in the right place at the right time?  I hope so.

Creative commons photo source

New finance is the future…. FundingKnight makes the Huffington Post

Just a short post today to direct your attention to Nasir Zubairi’s latest article on new finance for the Huffington Post.

It’s a well thought out piece, and of course we’re glad to be mentioned in the future of new finance.

Concluding that we can’t wait for our ailing banking system to recover, he writes:

We can do better. The alternatives are already here and innovation in the New Finance sector is progressing at a lightening pace. Entirely new banking models such as Fidor Bank in Germany, Holvi in Finland and Simple and Movenbank in the US will soon migrate to the UK. There are already several young firms focusing on niche elements of financial services to deliver exceptional, transparent and cheaper services to SMEs and consumers. There are firms providing Peer to Peer based access to credit, such as Fundingcircle, Zopa and Fundingknight, other firms providing lower cost access to currency and international trade services, such as Tradeshift, Currencyfair, Transferwise and The Currency Cloud.

Like Currency Cloud, who’ve just won new funding to continue changing the world of forex and international payments for small businesses,we’re ready to start writing the future.

At the end of his post Nasir writes, “New Finance is the future we must embrace”.

Well, we’re ready…. are you?