Breaking Banks

Introduction: An Industry Being Reborn and Reinvented

The premise of disruption in financial services is relatively new. With the exception perhaps of the push for deregulation in the 1970s, banking is not known for huge leaps in innovation or significant shifts in the dynamic of the players involved. Sure, there have always been mergers and acquisitions, and some industry consolidation from time to time, but there’s never really been anything that is akin to the level of disruption we’ve recently seen in the music or publishing industries, for example, or the dynamics of the communications sector with the shift from the telegraph to the telephone, and then from fixed-line to mobile.

In the midst of the financial crisis in 2009, Paul Volcker, the former U.S. Federal Reserve chief, berated the financial industry in respect to its track record on innovation:

I wish somebody would give me some shred of evidence linking financial innovation with a benefit to the economy.

—Paul Volcker commenting at the Wall Street Journal’s Future of Finance Initiative, December 7, 2009

Volcker went on to claim that the last great innovation in banking was, in fact, the ATM machine. Volcker has a point. In all, banking hasn’t really changed materially in hundreds of years. Ostensibly, the nineteenth-century form of the bank branch is still largely recognizable today. While we have had some so-called branch of the future concepts, the way we do banking has remained largely unchanged over the past ...