Disrupting the banks
Delivered on 23 April 2019 by Justin Pyvis. About a 5 min read.
I trust everyone had a relaxing Easter long weekend. This week's issue will be shorter than usual as I just want to briefly touch on a subject of immense frustration but more importantly, opportunity: banking.
If there's any industry that's ripe for disruption it must be the financial sector. Heavily regulated and dominated by a handful of large, often very old corporations, it can be an absolute chore to perform basic tasks that should be easy, such as transferring money. It's a sector seemingly littered with inefficiencies and annoyances at just about every turn, yet it continues to grow in terms of its share of Gross Domestic Product (GDP, see the Image of the Week at the bottom of this issue).
I was hopeful that Apple's much-hyped credit card would break out of that mould but it took the easy way out, partnering with a bank to create yet another run-of-the-mill credit card. Then there was last week's announcement that T-Mobile, an internet telecom in the US, would be releasing "T-Mobile Money", a no-fee transaction account that represents slightly better valuethan existing offerings for those will low balances (a 4% interest rate on the first $3,000, with 1% on anything above that). But it's still just same old, same old.
The financial sector won't be disrupted by tech companies that think they can beat the banks at their own game by producing an expensive card (Apple) or a fancy mobile app (T-Mobile). To truly shake the incumbents will require technology that can get past the requisite utilification of every player in the sector: a way to verify and guarantee transactions without the need for large, centralised systems of trust (banks) and the regulation that - by design - oppresses innovation.
We may not have invented that technology (yet). But it's looking increasingly likely that we have at least ventured down the right path, and that path is blockchain. The speculative fervor that surrounded everything crypto has passed and as Issue 18/2019pointed out, the wheat is finally being separated from the chaff. Simply existing in the blockchain space is no longer enough; only the best products - in terms of how well they can compete with existing industries (think Uber and taxis) - will grow in terms of market share and potentially, one day, market dominance.
I'm hopeful that at least one of those products will flip the banking industry upside down, eroding the rents they currently enjoy similarly to how Uber decimated the taxi cartel. The consumer surplus in doing so would be enormous.
Artificial intelligence is great, aside from the name
As with any emerging field, there will be winners and losers. IBM has realised that AI isn't well suited to discovering new drugs. Meanwhile, rigid rules-based fields such as accounting and imaging analysis seem like perfect fits, and are attracting investment.
- Stripe Backs $40 Million Investment in A.I. Accounting Service Pilot »
- Aidoc, the AI solution for medical imaging analysis, raises $27M Series B »
- IBM halting sales of Watson AI tool for drug discovery amid sluggish growth »
The US is struggling in China
A number of big companies are finding out the hard way that cracking China is easier said than done. Google, Facebook, and now Amazon are out of China, and Apple is struggling badly. Meanwhile, China's Bytedance is doing well in the US (via its TikTok app), although the company was forced to store all of its data outside of China and state that the Chinese government has no access (I don't buy that for a second).
- FCC set to block China Mobile bid to provide U.S. services »
- Amazon to close domestic marketplace business in China »
- The U.S. Is Losing a Major Front to China in the New Cold War »
- TikTok Brings Chinese-Style Censorship to America’s Tweens »
- China Regulators: “New Engine of Digital Economy is Blockchain, not Mining.” »
How will the internet die? Watch Europe
The European Union (EU) is leading the way in terms of regulating big tech. It's a bad idea, but when has a bad idea ever stopped the EU? We're going to see three versions of the internet emerge: a heavily censored internet (the China model); a heavily regulated, devoid of innovation internet (the European model); and a continuation of the status quo (the United States model).
- EU countries give final approval to copyright reform aimed at Google and Facebook »
- EU gives 'high-level' protection to whistleblowers »
- European Parliament passes online platform rules placing new limits on Amazon and Google »
- Government Seeks to Eliminate Internet Anonymity – With Severe Penalties »
- Facebook is discontinuing P2P payments in Messenger in the UK and France on June 15 »
How low can Zuckerberg go?
The whole world is now aware that Mark Zuckerberg and morals cannot be uttered with a straight face. There are no depths to which he will not sink to increase his power. If Facebook's shareholders really want to be rid of him, they'd be better off heading for the exits themselves.
- Zuckerberg leveraged Facebook user data to fight rivals and help friends, leaked docs show »
- Facebook says it 'unintentionally uploaded' 1.5 million people's email contacts without consent »
- Facebook says it stored millions of Instagram passwords unencrypted on its servers »
- Facebook perfects the art of the news dump »
- Facebook CEO Mark Zuckerberg said to be under close scrutiny in federal privacy probe »
- Facebook shareholders are getting fed up with Zuckerberg but can’t do anything about him »
How many subscriptions are too many?
I get subscription fatigue just looking at the number of products that have moved to the monthly subscription model. Music, video, gaming, the list goes on and on and grows every week.
- Xbox Game Pass Ultimate combines Xbox Live and Game Pass into $14.99/month subscription »
- Top 25 public game companies generated over $100 billion in 2018 revenue »
- Russian Gamer Brothers Are the Newest Hidden Billionaires »
- As Netflix Contends With More Rivals, Hulu Stands Out »
- Amazon Music Launches Free Streaming Tier, Through Alexa Only (for Now) »
Other bits of interest
- Mueller report sheds new light on how the Russians hacked the DNC and the Clinton campaign »
- Google flips the switch on its next big money maker: Maps »
- Samsung Galaxy Fold review: broken dream »
- Pinterest prices IPO at $19, valuing social media company at $10 billion »
- 5-star phonies: Inside the fake Amazon review complex »
- Qualcomm just beat Apple into submission »
Image of the week
Financial services are now about 8% of the US economy (as of 2010), up from a low of 2% at the end of the Second World War. That's not necessarily a bad thing, but it does mean there is now a huge pie just begging to have its rents captured by new entrants, provided their product is good enough to overcome the mountain of regulatory constraints the sector has built up over decades.