So often around the Fintech startup scene you can hear entrepreneurs pondering over their “frappacinos” on a shirt drenchingly humid, summer’s day…
“The Banks are so conservative….!! Bring it on!!”
Their knowing sneers of excitement starts to melt the ice.
That excitement continues to seep through every word in their carefully planned capital pitches as to why their next brainchild of disruptive Armageddon is going to succeed beyond their potential investors’ wildest expectations; as to why their new tech solution will change the world of finance irrevocably. Then the frustrating reality hits…
Fintech entrepreneurs drive, and are driven by, disruption. This disruption requires substantial energy and tenacity to get stuff done; to get things to happen. Slowly, that sea of energy is whittled down to a stream in the two-step playing field in Fintech – two steps forward and one step back as it slowly dissipates in an ocean of regulation, compliance and red tape. Whilst it is understandably challenging for entrepreneurs to have to deal with compliance, it is the de facto standard in the financial services sector in Australia, with this challenge coming from the sheer pace of technology.
The regulators, by the very nature of the beast have to be reactive to new technology. They have to assess the risks as the “proxy” for the man or woman in the street; to protect their interests vicariously. This involves time; the time to understand the technology, the time to understand the Fintech solution at hand. This breathing space is music to the banks; it gives them time to play catch-up and do what they are really good at – the boring stuff…
Bankers are a conservative breed; it’s in their DNA – I know I used to be one and deep down have maintained many of the traits associated with my legacy. But that conservatism means one thing ;
Bankers are masters at compliance.
The fear of multi-million dollar fines (even billion dollar fines) and the threat of losing valuable banking licences has conditioned bankers’ behaviour. That behaviour permeates organisations and becomes hard-wired into the culture. So much so, it is now one of the cornerstones of banking.
The end result, is that the banks have compliance down to a “T”; they have large teams of specialists looking at nothing other than compliance on a daily basis. They have spent years building relationships and reputations with all stakeholders in the compliance ecosystem – especially the regulators. They know the people; the wrinkles; the short cuts… in other words their conservatism helps them get things done – in relation to anything to do with compliance. So how does this help with the developing Blockchain technology?
Blockchain technology is constantly sitting on shifting sands as it finds its feet. New ideas are being developed for improvement all the time; new platforms established fuelled by close to $1bn of Venture Capital funds that have been invested into the space. The key issue and main difference with so much of the incumbent technology, is that at its very core, blockchain is based around open source technology. Just look at the public blockchain underpinning Bitcoin. It is tried and tested by the community that implemented it, and has stood the test of time over the past 6 years in the field with proven success. That’s why the banks love the underlying blockchain technology.
The open source nature of the technology also means the speed of any applications development is, with reasonable expectation, likely to be increased especially if the opens source protocols are supported by quality incumbents such as Microsoft, as is the case with their support of Ethereum, a relatively new smart contract platform overlaying the blockchain.
If this is the case, any head-start that Fintech startups may have through their dynamism and flexibility is going to be reduced; whilst at the compliance end, the banks will have a major, and significant, edge to pull themsleves back.
It will be interesting to see how the Blockchain battle plays out over time – but who knows, with the bankers’ undoubted success at being conservative, it may be their saving grace with the Blockchain race finishing up as a zero-sum-game.
If you are interested in understanding more about the Blockchain, its power and its challenges, why not check out my new book Down The Rabbit Hole, a book for business & non-technical people, like you, to truly understand the Blockchain & to capitalize on its power. Its available on :