Banking and the real e-race

Exponential growth sets new standards and raises expectations by customers; many industries have been disrupted by this phenomenon and banking will be no exception.

Transport, accommodation, retail and the media industries have all been disrupted by relatively new companies in a short period. Uber, Airbnb, Facebook and Alibaba dominate their markets with highly innovative and tech-savvy-customer-centric business modelsThey also don’t own the assets that traditional players in these industries thought were so important – as explained in this now-famous article by Tom Goodwin. [paragraph 1 of 5]

Exponential growth is best illustrated by the chessboard and wheat story (or rice and other variations). The inventor of chess asked to be rewarded in wheat calculated using a chessboard starting with one grain on the first square and doubling on each one thereafter. Using rice the total on the board eventually works out to 1000 times total worldwide rice production in 2010; however the real story is that the 2nd half contains more than 2 billion times the rice on the first half but only 32 squares previously started growing at 1, 2, 4, 8, 16 etc. [2 /5]

Growth in the first half of the chessboard is relatively (deceptively) slow but the second half is dramatically quick and many believe it best represents the current rate of digital disruption. Other examples of disruptive growth companies are Wikipedia, Instagram, Waze and Whatsapp; all of which also turned conventional business models upside down. They also re-used, adapted and learned from the traditionals they overtook: Wikipedia – MS Encarta, Instagram – Kodak, Waze – Navteq, Whatsapp – SMS. [3 /5]

Exponential companies dematerialise (do not need the ownership of) physical assets that previously enabled the activity; Uber – car, Instagram – camera, Airbnb – hotel room etc. They also demonetize; Wikipedia is open source while Microsoft’s Encarta was licensed, profit driven and failed. The last of the six “D”s, democratisation, is about tapping the naturally social nature of people to contribute and share information for the common good; Twitter – Arab spring, Waze – traffic patterns and Whatsapp’s highly successful groups feature. [4 /5]

The banking industry is extremely resilient but new start-ups are threatening the establishment with currently marginal technologies like bitcoin. Many banks are successful innovators and have stayed ahead of the curve with increasingly customer-centric channels, products and services. Exponential growth and the standards it sets for customer experience must be well understood to ensure these banks can own and lead the next wave rather than be disrupted and left behind by it[5 /5]

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