We’re living at a time of profound shifts in the way goods and services are distributed from producers to consumers. Whether finding a room on Airbnb, handmade jewelry on Etsy, or getting a ride through Uber, the Internet has transformed existing models and will continue to do so in the future as new markets and domains yield to the compelling efficiency of digital technology.
OPPORTUNITY BREEDS UPSTARTS…
Even before Thomas Edison famously invented the lightbulb, the great American culture of innovation created opportunities by combining technology advances in new ways. Andas the great economist Schumpeter described in his thesis of creative disruption, those entrenched players who can’t change with the times are displaced by upstarts who are willing to jump in and take a chance where established companies can't.
FINANCIAL SERVICES IS THE NEW LOCUS OF DISRUPTION.
This is what we are seeing in Financial Services across the board, and the evidence of disruptive change is everywhere. There’s no aspect of traditional banking that isn’t under attack by a raft of startups offering new and competitive ways to deliver value to the consumer and business customer. Credit cards, personal loans, mortgages, educational loans, asset management and other specific services are being “unbundled” from big banking, which is to the benefit of customers who can now have more choices, more competition, more efficient delivery and lower costs than ever before.
INNOVATION ON TOP OF COMMODITIZED TECHNOLOGY NOW MAKES IT POSSIBLE TO DISTRIBUTE CAPITAL IN NEW WAYS.
Especially for small and medium businesses, access to capital is essential for growth. And just as we have seen an explosion of new product offerings around capital for consumers, business capital is undergoing a revolution of its own. The last decade has produced a set of information technologies built on top of the internet that are now mature, secure, and commoditized in their availability and low pricing. These technologies let FinTech (financial technology) startups innovate rapidly by leveraging prior advances in web standards, encryption, machine learning, and a host of 3rd party providers of financial and non-financial data sources. Taken together, these enabling technologies make it easy and fast for borrowers to access lenders and share their information securely, and for lenders to develop a detailed and holistic view of the borrower’s business to deliver capital in a compelling offering.
In an upcoming post we’ll look at how these changes have effectively lowered the cost of distribution for capital as a product and the different ways customers benefit as a result.