Great spread
We are on the cusp of the “Great Proliferation” (the topic of my recent Tedx talk), a definitive shift in our era from unified power to a more decentralized, decentralized framework. Financial services are at a crossroads.
The coming wave promises to reshape the industry that is the guardian of our capital.
The key issues that financial services must address in this new era are:
How is fintech driving adoption?
A variety of new tools are increasing the adoption of financial services. Banking-as-a-service platforms allow anyone to offer bank accounts, credit cards, and insurance policies. Companies like Plaid and open banking regulations are greatly simplifying the interconnection of accounts, thereby reducing the value of centralized, single-service (existing) players.
It’s no wonder that fintech activity has exploded over the past decade. But what will the next few decades bring?
Can inclusivity become a core philosophy?
Technology has the potential to bring financial services to the masses, including services that have been previously underserved or excluded by the traditional banking sector. We are already seeing the impact of mobile banking in Africa and government-backed systems such as PIX and Aadhar in Brazil and India. Big US fintech companies like Chime (of which I am an investor) and Robinhood are democratizing access to low-fee bank accounts, investments, and more.
Questions remain. How can financial institutions leverage this to offer truly comprehensive services?
What kind of innovations will emerge?
Significant adoption could shift production from globally integrated supply chains to closer, more local ones. As a result, the need for new financial products and services is increasing. How will financial services innovate to meet the demands of a new generation of entrepreneurs whose needs are different from those of the corporate giants of yesteryear?
With the rise of freelancers and contract workers, personal financial security has become more precarious. What solutions will emerge to provide these workers with the economic security traditionally afforded by full-time employment?
What skills will be valued in a diffuse future?
As the job market changes, so do the skills needed to succeed in it. Financial services must ask themselves how they can contribute to the education and skills development of future generations to prepare them for this new situation.
If AI automates financial decision-making, how will we prepare our children for the future?
Is the local economy the new global?
As economic activity moves to become more local or regional, financial institutions need to consider their role at the micro level. How will they adjust their strategies to accommodate the resurgence of local businesses and community projects?
Branch banking is making a comeback in the US, but will it be the way to support a more distributed population? Or is there another way to build genuine, trusted relationships with customers around the world in a more distributed way? Is there one?
How will decentralization restructure finance?
The emergence of blockchain and decentralized finance (DeFi) is perhaps one of the most obvious attempts in the proliferation of financial services, moving us from centralized to decentralized systems. They could upend the centralized banking model.
But what does this actually mean? Will peer-to-peer lending become the norm? And how can traditional financial institutions adapt to a world without intermediaries? Is not it?
The answers to these questions are not yet clear, but one thing is certain: the industry needs to be proactive about mass adoption. Financial services need to envision their place in a world where individuals have more agency, where the local and global intertwine in new ways, and where sustainability is not just a choice but a necessity.
Amid this kaleidoscopic change, financial services must find a new identity, not as the behemoths of a bygone era, but as nimble drivers of a diffuse future. How we respond now will determine tomorrow's financial landscape. It's time for the industry to innovate, not just to survive, but to lead in the era of mass adoption.
