by Philippe Gastonne, The Daily Bell:
We are becoming used to doing more of our banking online or on mobiles – in fact it has probably been some time since many of us actually set foot in a high street bank branch. This might lead you to conclude that the internet has shaken up or disrupted the banking sector.
But actually banking hasn’t even begun to be disrupted in the same way that the likes of Expedia, Betfair and Amazon have transformed the face of high street travel, betting and book-selling respectively. That is changing with the growth of peer-to-peer or market-place lending platforms which connect borrowers and savers.
The combination of these disruptive waves should have banks worried and I believe they are. – The Telegraph, Aug. 22, 2015
In a world where economic dinosaurs quickly go extinct, traditional banking is one of the prime survivors. Abundant capital and friendly capital have let it adapt to every challenge.
When banks lost commercial lending business to asset backed securitization in the 1980s, U.S. bankers convinced politicians to knock down the Glass-Steagall wall so they could enter the trading arena. When their risky trades blew up in 2008, the Federal Reserve came to their rescue with unlimited free capital. Instead of shrinking, banks grew bigger and bolder.
Now the behemoth banks face a new existential threat. “Peer-to-peer” online lending platforms are still only a tiny fly buzzing around the banking brontosaurus, but disintermediation always begins small. Today’s economy ruthlessly destroys any intermediary who doesn’t add significant value – and the core of banking is to connect lenders and borrowers.
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