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Unless the more established players in the finance marketplace wake up soon and come up with innovative new products to match or better those offered by the new players then they will have lost swathes of the marketplace for good. So what are the barriers to change?
Do not go gentle into that good night,
Old age should burn and rave at close of day;
Rage, rage against the dying of the light.
In its 320 year history the Bank of England has seen off wars and recessions, mergers and industrial revolutions. Now, the banking and finance industry is facing another change and this is one which has the potential to shake up the sector far more profoundly than anything which has gone before. Quite simply, sections of the finance industry are sleepwalking into oblivion.
The reason is at the same time very simple and extremely complex. Decades of short term profiteering, treating finance as a complex toy and customers as objects to be taken advantage of came home to roost in the recent crash. Like wounded animals, the instinctive reaction was to retreat, to find a safe haven and to hope for a recovery to ‘business as usual’. But whilst established finance firms retreated new players entered the marketplace and these players were hungry for business.
Without the traditional shackles of history these new players were open to customer demand, prepared to be innovative, to do things differently and to be agile and fast in their approach. Payday lenders may have come in for some stick recently but they were able to give an answer to a loan request faster than a more traditional institution would take to even arrange an appointment to see an advisor. New organisations such as Crowdfunder UK and Crowdcube are helping businesses and communities to raise funds from the marketplace in a fraction of the time in which a traditional lender would still be asking for references. Peer to peer lending has grown in popularity to such an extent that the Government is consulting on whether it should form the basis of a third type of ISA.
Unless the more established players in the finance marketplace wake up soon and come up with innovative new products to match or better those offered by the new players then they will have lost swathes of the marketplace for good. So what are the barriers to change? It can’t be regulation as the regulator has already signalled its openness to innovative ways of bringing products to market. It can’t be customer resistance as people are voting with their feet and embracing new models of finance which don’t require hours of red tape and paperwork.
The answer can only be that the culture of reticence, of prudence and inertia which stood the finance houses in such good stead for years is still holding sway. This means that innovative ideas are being swamped by the fear factor; fear of diverting funds to research, fear of changing infrastructure, fear of doing something new and fear of failure. But let’s be honest. The processes which arose from decades of prudence resulted in a crash which shook the world. Now all that customers and regulators and governments want is for businesses to change that culture into one which values long term growth and acts in the best interests of customers and investors.
Yes change can be scary but the alternative is even scarier. The world won’t stand idly by and accept the continuation of a model which brought ruin to so many. There are new kids on the block now and unless more established businesses step up and embrace a new customer focused innovative model then the new kids will simply take over.