Yann Ranchere, partner at venture investment and advisory firm Anthemis, discusses why 2016 could see game changing challengers enter the banking sector.
2016 will see a strong competition in the core banking space. In Europe especially, a crop of new banks and alternative banks will push strongly in the market. European digital banks such as Fidor are expanding beyond their core market. The UK regulator’s push to lower the barrier to entry to become a bank will come to reality with Atom Bank and Tandem establishing themselves.
Alternative solutions based on prepaid born in various European countries are also expanding beyond borders, with Sepa as a core foundation to propose bank like services. With PSD2 looming, traditional banks have the opportunity / incentive to more easily expand collaboratively with startups.
Looking to alternative lenders, roboadvisors and other digital financial services players; having spent the last years building trusted brands and consolidating a customer base, it is highly possible they will start leveraging those to expand horizontally in other markets, whether collaboratively or by launching their own services. For example, blended remittance and multi currencies current accounts are highly complementary services for clients with attachments to multiple countries. This collaboration between emerging players will most likely extend beyond end customers, toward balance sheet management, especially for emerging banks looking to match assets to their new found deposits.
Looking beyond the pure European and US context, in a developing world that is increasingly interconnected, the winning platform of the coming decades appears to be the messaging platform: Wechat, Line, Facebook Messenger and WhatsApp are all showing significant growth, engagement and increasingly financial services integration. 2016 may be the year where we will see Facebook becoming more integrated with financial services, leading with seamless blending of messaging, commerce and payment first and potentially P2P transactions next.
If 2015 was the awakening of the entrepreneurs, investors and incumbents to the potential disruption of insurance by digital first players, 2016 may well shape up to be the coming of more true game changing challengers in the space.
Taking a longer view, it will be important to focus on two complementary trends; Artificial Intelligence and omnipresent data. Financial services' core functions are based on managing scarcity and information asymmetry. With the amount of data increasing at high speed, notably through widespread, cheaper and more detailed sensors and the capability to process it progressing in parallel through the use of machine intelligence, the core market of financial services will be affected.
The autonomous car is the perfect metaphor for it: what is the insurance market of a sensor full, crash avoiding vehicle? But similarly, what new markets will this create for financial services?
Prior to joining Anthemis, Yann worked as a consultant at Kurt Salmon in New York in various sectors: retail banking, private banking, capital markets, custody and fund administration and lead the financial services innovation activity in the US. He worked previously in Luxembourg and France.