Anonymous asked Ray Garcia, 2/24/2016 11:37:35 PM

Are there any areas in banking or fintech ripe for disruption?

Earlier in your career it looks like you worked in banking which we know to be a highly regulated industry. What opportunities exist for early stage companies in the banking or financial services sector? Are there any areas in banking or fintech ripe for disruption?

2/25/2016 4:34:24 PM,
Ray Garcia replied:

While Fintech gets a lot of attention and excessive investment I do not see many real innovations that will disrupt the existing entrenched players.  What one finds are various strategies for layering on top of the existing banking and payments infrastructure.  They are mostly incremental and easily reproduced.  When the focus is on the technology that is the least interesting.  What one sees Stripe, Square, Dwolla or the older Paypal are overlays.

Much speculation has been touted about M-Pesa in Kenya but what isn't revealed is that it has a pre-existing cultural dynamic that was conducive to its emergence there.  The technology only captured and expanded on what people already did.

The latest investor hysteria is Bitcoin and blockchain related technologies, mostly built on speculation by the technical elite, and it may slowly be mainstreamed by the banks to reduce internal cost, so again its an optimization.

Where I think the major opportunities remain, which is less a disruption of the status quo, but an expansion into new markets, are solutions that address the needs of the developing world, the non-banked, under-banked populations that are reliant on cash. The typical view is that this will converge on to the mobile devices but this hasn't happened yet and I do not think the solution is turn cash into digital, it doesn't recognize why and how people use cash and all the implications for removing it from an economy.  What the new opportunity is here I am not going to reveal!

The most interesting area is a complete reconception of what a bank is for.  We are a long way from this now due to the dynamics that have been created by the social networks and the race to the bottom in winner take all network economics.  Once this all comes to pass, and people understand the true cost of the constants tweets and selfies and narcissistic obsessions, then space will be available for advances that might be dramatic, but my conjecture is we are at least ten years away from this.  That is the disruption moment but things have to get a lot worse before they get better.

To answer the question directly, the disruption comes from breaking the existing systems, for now that is all in cyber-warfare, break the security and have a way to fix it and that will cause some of the disruptions that are needed.